Exhibit (3)(i)
RESTATED CERTIFICATE OF INCORPORATION
OF
J. C. PENNEY HOLDINGS, INC.
The present name of the corporation is J. C. Penney Holdings, Inc.
(the "Company"). The Company was incorporated under the name of J. C. Penney
Holdings, Inc. by the filing of its original Certificate of Incorporation with
the Secretary of State of the State of Delaware on January 22, 2002. This
Restated Certificate of Incorporation was duly adopted in accordance with the
provisions of Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware and hereby amends and restates the provisions of the Company's
Certificate of Incorporation, to read in its entirety as follows:
First: The name of the corporation (which is herein referred to as the
Company) shall be J. C. Penney Company, Inc.
Second: The address of the Company's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle Delaware 19801. The name of the Company's registered agent
at such address is The Corporation Trust Company.
Third: The purpose of the Company is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
Fourth: The total number of shares of all classes of stock which the
Company shall have authority to issue is 1,275,000,000 shares, of which
25,000,000 shares shall be shares of Preferred Stock without par value
(hereinafter called Preferred Stock) and 1,250,000,000 shares shall be shares of
Common Stock of 50(cent) par value (hereinafter called Common Stock).
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock as Preferred Stock of one or more
series and in connection with the creation of any such series to fix by the
resolution or resolutions providing for the issue of shares thereof the
designation, powers, preferences, and relative, participating, optional, or
other special rights of such series, and the qualifications, limitations, or
restrictions thereof. Such authority of the Board of Directors with respect to
each such series shall include, but not be limited to, the determination of the
following:
(a) the distinctive designation of, and the number of shares
comprising, such series, which number may be increased (except where
otherwise provided by the Board of Directors in creating such series)
or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the Board of
Directors;
(b) the dividend rate or amount for such series, the conditions
and dates upon which such dividends shall be payable, the relation
which such dividends
shall bear to the dividends payable on any other class or classes or
any other series of any class or classes of stock, and whether such
dividends shall be cumulative, and if so, from which date or dates for
such series;
(c) whether or not the shares of such series shall be subject to
redemption by the Company and the times, prices, and other terms and
conditions of such redemption;
(d) whether or not the shares of such series shall be subject to
the operation of a sinking fund or purchase fund to be applied to the
purchase or redemption of such shares and if such a fund be
established, the amount thereof and the terms and provisions relative
to the application thereof;
(e) whether or not the shares of such series shall be convertible
into or exchangeable for shares of any other class or classes, or of
any other series of any class or classes, of stock of the Company and
if provision be made for conversion or exchange, the times, prices,
rates, adjustments, and other terms and conditions of such conversion
or exchange;
(f) whether or not the shares of such series shall have voting
rights, in addition to the voting rights provided by law, and if they
are to have such additional voting rights, the extent thereof;
(g) the rights of the shares of such series in the event of any
liquidation, dissolution, or winding up of the Company or upon any
distribution of its assets; and
(h) any other powers, preferences, and relative, participating,
optional, or other special rights of the shares of such series, and
qualifications, limitations, or restrictions thereof, to the full
extent now or hereafter permitted by law and not inconsistent with the
provisions hereof.
All shares of any one series of Preferred Stock shall be identical in
all respects except as to the dates from which dividends thereon shall be
cumulative. All series of the Preferred Stock shall rank equally and be
identical in all respects except as otherwise provided in the resolution or
resolutions providing for the issue of any series of Preferred Stock.
Whenever dividends upon the Preferred Stock at the time outstanding,
to the extent of the preference to which such stock is entitled, shall have been
paid in full or declared and set apart for payment for all past dividend
periods, and after the provisions for any sinking or purchase fund or funds for
any series of Preferred Stock shall have been complied with, the Board of
Directors may declare and pay dividends on the Common Stock, payable in cash,
stock, or otherwise, and the holders of shares of Preferred Stock shall not be
entitled to share therein, subject to the provisions of the resolution or
resolutions creating any series of Preferred Stock.
In the event of any liquidation, dissolution, or winding up of the
Company or upon the distribution of the assets of the Company, all assets and
funds of the Company remaining, after the payment to the holders of the
Preferred Stock of the full preferential amounts to which they shall be entitled
as provided in the resolution or resolutions creating any series thereof, shall
be divided and distributed among the holders of the Common Stock ratably, except
as may otherwise be provided in any such resolution or resolutions. Neither the
merger or consolidation of the Company with another corporation nor the sale or
lease of all or substantially all the assets of the Company shall be deemed to
be a liquidation, dissolution, or winding up of the Company or a distribution of
its assets.
Except as otherwise required by law or provided by a resolution or
resolutions of the Board of Directors creating any series of Preferred Stock,
the holders of Common Stock shall have the exclusive power to vote and shall
have one vote in respect of each share of such stock held and the holders of
Preferred Stock shall have no voting power whatsoever. Except as otherwise
provided in such a resolution or resolutions, the authorized shares of any class
or classes may be increased or decreased by the affirmative vote of the holders
of a majority of the outstanding shares of stock of the Company entitled to
vote.
Pursuant to the authority conferred by this Article Fourth upon the
Board of Directors of the Company, the Board of Directors created a series of
1,600,000 shares of Preferred Stock designated as Series A Junior Participating
Preferred Stock by filing a Certificate of Designations of the Company with the
Secretary of State of the State of Delaware (the "Secretary of State") and the
voting powers, designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or restrictions
thereof, of the Company's Series A Junior Participating Preferred Stock are set
forth in Exhibit A hereto and are incorporated herein by reference.
Pursuant to the authority conferred by this Article Fourth upon the
Board of Directors of the Company, the Board of Directors created a series of
1,400,000 shares of Preferred Stock designated as Series B ESOP Convertible
Preferred Stock by filing a Certificate of Designations of the Company with the
Secretary of State and the voting powers, designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the Company's Series B
ESOP Convertible Preferred Stock are set forth in Exhibit B hereto and are
incorporated herein by reference.
Fifth: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized and empowered:
(a) to make, alter, and repeal the Bylaws of the Company, subject
to the power of the stockholders of the Company to alter or repeal any
Bylaw made by the Board of Directors;
(b) subject to the laws of the State of Delaware, from time to
time to sell, lease, or otherwise dispose of any part or parts of the
properties of the Company
and to cease to conduct the business connected therewith or again to
resume the same, as it may deem best; and
(c) in addition to the powers and authorities hereinbefore and by
the laws of the State of Delaware conferred upon the Board of
Directors, to exercise all such powers and to do all such acts and
things as may be exercised or done by the Company; subject,
nevertheless, to the provisions of said laws, of the Certificate of
Incorporation as from time to time amended of the Company, and of its
Bylaws.
Sixth: (a) Except as otherwise provided for or fixed by or pursuant to
the provisions of Article Fourth of this Certificate of Incorporation relating
to the rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, the number of directors of the Company
shall be fixed from time to time by or pursuant to the Bylaws of the Company.
The directors, other than those who may be elected pursuant to the aforesaid
provisions of said Article Fourth, shall be classified, with respect to the time
for which they severally hold office, into three classes, as nearly equal in
number as possible, as shall be provided in the manner specified in the Bylaws
of the Company, the first such class to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 1986, the second
such class to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 1987, and the third such class to be originally
elected for a term expiring at the annual meeting of stockholders to be held in
1988, with each director in each class to hold office until his or her successor
is elected and qualified. At each annual meeting of stockholders beginning with
the annual meeting of stockholders to be held in 1986, the successors of the
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders to be held in
the third year following the year of their election, with each director in each
such class to hold office until his or her successor is elected and qualified.
(b) Advance notice of stockholder nominations for the election of
directors shall be given in the manner provided by the Bylaws of the Company at
the time in effect.
(c) Except as otherwise provided for or fixed by or pursuant to
the provisions of Article Fourth of this Certificate of Incorporation relating
to the rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, newly-created directorships resulting
from any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal, or other
cause shall be filled only by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.
(d) Except as otherwise provided for or fixed by or pursuant to
the provisions of Article Fourth of this Certificate of Incorporation relating
to the rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, any director may be removed from
office, with or without cause, but only by the affirmative vote of at least 80%
of the combined voting power of the then-outstanding shares of all classes and
series of stock of the Company entitled to vote generally in the election of
directors ("Voting Stock"), voting together as a single class (it being
understood that for the purposes of this Article Sixth, each share of the Voting
Stock shall have the number of votes granted to it in accordance with Article
Fourth of this Certificate of Incorporation).
(e) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of at least 80% of the
combined voting power of the Voting Stock, voting together as a single class,
shall be required to alter, amend, or repeal, or adopt any provision
inconsistent with, this Article Sixth.
Seventh: Section 1. The vote of stockholders of the Company required
to approve any Business Combination shall be as set forth in this Article
Seventh. The term "Business Combination", as well as other capitalized terms
used in this Article Seventh, shall have the respective meanings ascribed to
them in Section 3 of this Article Seventh.
Irrespective of any affirmative vote required by law or by this
Certificate of Incorporation, and except as otherwise expressly provided in
Section 2 of this Article Seventh:
(i) any merger or consolidation of the Company or any
Subsidiary with (a) any Interested Stockholder or (b) any other Person
(whether or not itself an Interested Stockholder or an Affiliate of an
Interested Stockholder) which is, or after such merger or
consolidation would be, an Interested Stockholder or an Affiliate of
an Interested Stockholder,
(ii) any sale, lease, exchange, mortgage, pledge, transfer,
or other disposition (in one transaction or a series of transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Company or any Subsidiary
having an aggregate Fair Market Value of $100 million or more,
(iii) any sale, lease, exchange, mortgage, pledge, transfer,
or other disposition (in one transaction or a series of transactions)
to the Company or any Subsidiary of any assets of any Interested
Stockholder or any Affiliate of any Interested Stockholder having an
aggregate Fair Market Value of $100 million or more,
(iv) any issuance or transfer by the Company or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Company or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested
Stockholder in exchange for cash, securities, or other property (or a
combination thereof) having an aggregate Fair Market Value of $100
million or more,
(v) the adoption of any plan or proposal for the liquidation
or dissolution of the Company proposed by or on behalf of any
Interested Stockholder or any Affiliate of any Interested Stockholder,
or
(vi) any reclassification of securities (including any
reverse stock split), or recapitalization of the Company, or any
merger or consolidation of the Company with any of its Subsidiaries or
any other transaction (whether or not with or into or otherwise
involving an Interested Stockholder), which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity, or securities convertible
into any equity, securities of the Company or any Subsidiary, as the
case may be, which is, directly or indirectly, owned by any Interested
Stockholder or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of at least 80% of the combined voting power
of the then-outstanding shares of all classes and series of stock of the Company
entitled to vote generally in the election of directors ("Voting Stock"), voting
together as a single class (it being understood that for the purposes of this
Article Seventh, each share of Voting Stock shall have the number of votes
granted to it in accordance with Article Fourth of this Certificate of
Incorporation). Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may otherwise be
applicable, by law or in any agreement with any national securities exchange or
otherwise.
Section 2. Any Business Combination which meets all the conditions
specified in either paragraph A or paragraph B below shall not be subject to the
provisions of Section 1 of this Article Seventh and shall require only such
affirmative vote as is required by law and any other provision of this
Certificate of Incorporation:
A. the Business Combination shall have been approved by a majority of
the Disinterested Directors;
- or -
B. all the following conditions with respect to such Business
Combination shall have been met:
(i) the aggregate amount of cash and the Fair Market Value as of
the date of the consummation of the Business Combination of consideration
other than cash to be received per share by holders of Common Stock in such
Business Combination, shall be at least equal in value to the higher of the
following:
(a) if applicable, the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees, and
option costs) paid by the
Interested Stockholder (before or after becoming an Interested
Stockholder), or any Affiliate or Associate thereof, in acquiring
Beneficial Ownership of any shares of Common Stock (1) within the
two-year period immediately prior to the first public announcement of
the proposal of the Business Combination ("Announcement Date") or (2)
in the transaction in which it became an Interested Stockholder,
whichever is higher; or
(b) the Fair Market Value per share of Common Stock of the
Company (1) on the Announcement Date, or (2) on the date on which the
Interested Stockholder became an Interested Stockholder
("Determination Date"), whichever is higher;
(ii) the aggregate amount of cash and the Fair Market Value as
of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of shares
of any class or series of outstanding Voting Stock other than Common Stock
shall be at least equal to the highest of the following (it being intended
that the requirements of this paragraph B(ii) of this Section 2 of Article
Seventh shall be required to be met with respect to every class or series,
as the case may be, of outstanding Voting Stock, whether or not the
Interested Stockholder has previously acquired any shares of such class or
series of Voting Stock):
(a) if applicable, the highest per share price (including
any brokerage commissions, transfer taxes, soliciting dealers' fees,
and option costs) paid by the Interested Stockholder (before or after
becoming an Interested Stockholder) for any shares of such class or
series of Voting Stock acquired by it (1) within the two-year period
immediately prior to the Announcement Date or (2) in the transaction
in which it became an Interested Stockholder, whichever is higher;
(b) if applicable, the highest preferential amount per
share to which the holders of shares of such class or series, as the
case may be, of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution, or winding up of
the Company; or
(c) the Fair Market Value per share of such class or
series, as the case may be, of Voting Stock on the Announcement Date or on
the Determination Date, whichever is higher;
(iii) the price determined in accordance with paragraphs B(i)
and B(ii) of this Section 2 of Article Seventh shall be subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination of shares, or similar event;
(iv) the consideration to be received by the holders of a
specified class or series of outstanding Voting Stock (including Common
Stock) shall be in cash or in the same form as that which the Interested
Stockholder has previously paid for shares of such class or series of
Voting Stock; if the Interested Stockholder had paid for shares of any
class or series
of Voting Stock with varying forms of consideration, the form of
consideration for such class or series of Voting Stock shall, at the option
of the Interested Stockholder, be either cash or the form used to acquire
the largest number of shares of such class or series of Voting Stock
previously acquired by it;
(v) after such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such Business
Combination: (a) except as approved by a majority of the Disinterested
Directors, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not
cumulative) on the outstanding Preferred Stock; (b) there shall have been
(i) no reduction in the annual rate of dividends payable or last paid, as
the case may be, on the Common Stock (except as necessary to reflect any
subdivision of such Common Stock) except as approved by a majority of the
Disinterested Directors and (ii) an increase in the annual rate of dividends
last paid on the Common Stock, as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization, or
any similar transaction which has the effect of reducing the number of
outstanding shares of such Common Stock, unless the failure so to increase
such annual rate shall have been approved by a majority of the Disinterested
Directors; and (c) such Interested Stockholder shall not have acquired
Beneficial Ownership of any additional shares of Voting Stock, except as
part of the transaction which resulted in such Interested Stockholder
becoming an Interested Stockholder;
(vi) after such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not have received
the benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges, or other
financial assistance or any tax credits or other tax advantages provided by,
or as a result of its equity position in, the Company, whether in
anticipation of or in connection with such Business Combination or
otherwise; and
(vii) a proxy statement or information statement describing
the proposed Business Combination (and including the views of the
Disinterested Directors, if requested by the Disinterested Directors, and of
an independent investment banker, if any, selected by such Disinterested
Directors with respect to the proposed Business Combination) and complying
with the disclosure and other requirements of the Securities Exchange Act of
1934 and the rules and regulations thereunder (or any subsequent provisions
replacing such requirements of such Act, rules, or regulations) shall be
mailed at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy statement or information statement is
required to be mailed pursuant to such Act or subsequent provisions) to
stockholders of the Company.
Section 3. For purposes of this Article Seventh:
A. An "Affiliate" of, or a Person "Affiliated" with, a
specified Person, shall mean a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified.
B. "Announcement Date" shall have the meaning set forth in
paragraph B(i)(a) of Section 2 of this Article Seventh.
C. The term "Associate" used to indicate a relationship with
any Person shall mean (1) any corporation or organization (other than the
Company or any Subsidiary), of which such Person is an officer or partner or is,
directly or indirectly, the Beneficial Owner of 10% or more of any class of
equity securities, (2) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar fiduciary capacity, and (3) any relative or spouse of such
Person, or any relative of such spouse, who has the same home as such Person or
who is a director or officer of the Company or any Subsidiary.
D. A Person shall be a "Beneficial Owner" of any Voting Stock:
(i) which such Person or any of its Affiliates or
Associates owns, directly or indirectly;
(ii) which such Person or any of its Affiliates or
Associates has (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement, or understanding or
upon the exercise of conversion rights, exchange rights,
warrants, or options, or otherwise, or (b) the right to vote
(whether or not irrevocable) pursuant to any agreement,
arrangement, or understanding; or
(iii) which is Beneficially Owned, directly or
indirectly, by another Person with which such Person or any of
its Affiliates or Associates has any agreement, arrangement, or
understanding for the purpose of acquiring, holding, voting, or
disposing of any shares of Voting Stock,
and any Voting Stock of which a Person shall be the Beneficial Owner shall be
"Beneficially Owned" by, or be under the "Beneficial Ownership" of, such Person.
E. "Business Combination" shall mean any transaction which is
referred to in any one or more of clauses (i) through (vi) of Section 1 of this
Article Seventh.
F. In the event of any Business Combination in which the
Company survives, the phrase "consideration other than cash to be received" as
used in paragraphs B(i) and (ii) of Section 2 of this Article Seventh shall
include shares of Common Stock and shares of any other class or series of
outstanding Voting Stock retained by the holders of such shares, or both.
G. "Determination Date" shall have the meaning set forth in
paragraph B(i)(b) of Section 2 of this Article Seventh.
H. "Disinterested Director" shall mean any member of the Board
of Directors who is not an Affiliate, an Associate, or a nominee of the
Interested Stockholder and who was a
member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a
Disinterested Director who is not an Affiliate or Associate of the Interested
Stockholder and is recommended to succeed a Disinterested Director by a majority
of Disinterested Directors then on the Board of Directors.
I. "Fair Market Value" shall mean: (i) in the case of stock,
the highest closing sale price of a share of such stock during the 30 calendar
day period immediately preceding the date in question on the Composite Tape for
New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on such
Composite Tape, on the New York Stock Exchange, or, if such stock is not listed
on such Exchange, on the principal United States securities exchange registered
under the Securities Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such exchange, the highest closing bid quotation
with respect to a share of such stock during the 30 calendar day period
immediately preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then in use,
or if no such quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of the
Disinterested Directors; and (ii) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined by a majority of the Disinterested Directors.
J. "Interested Stockholder" shall mean any Person (other than
the Company, any Subsidiary, or any employee benefit plan of the Company or any
Subsidiary) who or which:
(i) is the Beneficial Owner, directly or indirectly, of
at least 10% of the Voting Stock;
(ii) is an Affiliate of the Company and at any time within
the two-year period immediately prior to the date in question
was the Beneficial Owner, directly or indirectly, of at least
10% of the Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the
two-year period immediately prior to the date in question
Beneficially Owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933, as
amended.
For purposes of determining whether a person is an Interested Stockholder, the
number of shares of Voting Stock deemed to be outstanding shall include shares
deemed owned through application of paragraph D of this Section 3, but shall not
include any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement, or understanding or upon exercise of conversion rights,
warrants, or options, or otherwise.
K. "Person" shall mean any individual, firm, trust,
partnership, association, corporation, or other entity.
L. "Subsidiary" shall mean any corporation of which a majority
of any class of equity security is owned, directly or indirectly, by the
Company.
M. "Voting Stock" shall have the meaning set forth in Section
1 of this Article Seventh.
Section 4. A majority of the Disinterested Directors shall have
the power and duty to determine for the purposes of this Article Seventh, on the
basis of information known to them after reasonable inquiry, (A) whether a
person is an Interested Stockholder, (B) the number of shares of Voting Stock
beneficially owned by any person, (C) whether a Person is an Affiliate or
Associate of another, and (D) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Company or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $100 million or more. A
majority of the Disinterested Directors shall have the further power to
interpret all the terms and provisions of this Article Seventh.
Section 5. Nothing contained in this Article Seventh shall be
construed to relieve any interested Stockholder from any fiduciary obligation
imposed by law.
Section 6. Notwithstanding any other provisions of this
Certificate of Incorporation or the Bylaws (and notwithstanding the fact that a
lesser percentage may otherwise be specified by law, this Certificate of
Incorporation, or the Bylaws), the affirmative vote of at least 80% of the
Voting Stock, voting together as a single class (it being understood that for
the purposes of this Article Seventh, each share of the Voting Stock shall have
the number of votes granted to it in accordance with Article Fourth of this
Certificate of Incorporation), shall be required to alter, amend, or repeal, or
adopt any provisions inconsistent with, this Article Seventh.
Eighth: Any action required or permitted to be taken by the
holders of the Voting Stock must be effected at a duly called annual or special
meeting of such holders and may not be effected by any consent in writing by
such holders. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of at least 80% of the
combined voting power of the then-outstanding shares of all classes and series
of stock of the Company entitled to vote generally in the election of directors
("Voting Stock"), voting together as a single class (it being understood that
for the purposes of this Article Eighth, each share of the Voting Stock shall
have the number of votes granted to it in accordance with Article Fourth of this
Certificate of Incorporation), shall be required to alter, amend, or repeal, or
adopt any provisions inconsistent with, this Article Eighth.
Ninth: The Board of Directors shall have the power to make,
alter, amend, or repeal, or adopt any provision inconsistent with, the Bylaws
(except insofar as the Bylaws adopted by the stockholders shall otherwise
provide). Any Bylaws made by the directors under the powers conferred hereby may
be altered, amended, or repealed, and any provisions inconsistent therewith may
be adopted, by the directors or by the stockholders. Notwithstanding the
foregoing and anything contained in this Certificate of Incorporation to the
contrary, Section
2 of Article II, and Sections 3, 12, 13, and 15 of Article III of the Bylaws,
all as in effect simultaneously with the effectiveness of this Article, shall
not be altered, amended, or repealed, and no provision inconsistent therewith
shall be adopted, without the affirmative vote of at least 80% of the combined
voting power of the then-outstanding shares of all classes and series of stock
of the Company entitled to vote generally in the election of directors ("Voting
Stock"), voting together as a single class (it being understood that for the
purposes of this Article Ninth, each share of the Voting Stock shall have the
number of votes granted to it in accordance with Article Fourth of this
Certificate of Incorporation). Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of at least
80% of the Voting Stock, voting together as a single class, shall be required to
alter, amend, or repeal, or adopt any provision inconsistent with, this Article
Ninth.
Tenth: A director of the Company shall not be personally liable
to the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law is hereafter amended to permit
further limitation on or elimination of the personal liability of the Company's
directors for breach of fiduciary duty, then a director of the Company shall be
exempt from such liability for any such breach to the full extent permitted by
the Delaware General Corporation Law as so amended from time to time. Any repeal
or modification of the foregoing provisions of this Article Tenth, or the
adoption of any provision inconsistent herewith, shall not adversely affect any
right or protection of a director of the Company hereunder in respect of any act
or omission of such director occurring prior to such repeal, modification, or
adoption of an inconsistent provision.
IN WITNESS WHEREOF, the Company has caused this Restated
Certificate of Incorporation to be signed in its name by its Chairman of the
Board this 23rd day of January 2002.
J. C. PENNEY HOLDINGS, INC.
By: _____________________________________
Charles R. Lotter
Executive Vice President,
Secretary and
General Counsel
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
J. C. PENNEY COMPANY, INC.
Pursuant to Section 151 of the Delaware
General Corporation Law
J. C. Penney Company, Inc. (f/k/a J. C. Penney Holdings, Inc.), a
company organized and existing under the laws of the State of Delaware (the
"Company"), DOES HEREBY CERTIFY that pursuant to authority conferred on the
Board of Directors of the Company by its Certificate of Incorporation and the
provisions of Section 151(g) of the General Corporation Law of the State of
Delaware, the Board of Directors on January 22, 2002 adopted the following
resolution:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Company in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Company be, and hereby is,
created and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional or other special rights of the
shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
1,600,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the provisions for adjustment hereinafter set forth,
the holders of shares of Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose,
1
(i) cash dividends in an amount per share (rounded to the nearest cent) equal to
1,000 times the aggregate per share amount of all cash dividends declared or
paid on the Common Stock, 50(cent) par value per share, of the Company (the
"Common Stock") and (ii) a preferential cash dividend ("Preferential Dividend"),
if any, on the first day of February, May, August and November of each year
(each a "Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a share
of Series A Preferred Stock, in an amount equal to $50.00 per share of Series A
Preferred Stock less the per share amount of all cash dividends declared on the
Series A Preferred Stock pursuant to clause (i) of this sentence since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Company shall,
at any time after the issuance of any share or fraction of a share of Series A
Preferred Stock, make any distribution on the shares of Common Stock of the
Company, whether by way of a dividend or a reclassification of stock, a
recapitalization, reorganization or partial liquidation of the Company or
otherwise, which is payable in cash or any debt security, debt instrument, real
or personal property or any other property (other than cash dividends subject to
the immediately preceding sentence and other than a distribution of shares of
Common Stock or other capital stock of the Company and other than a distribution
of rights or warrants to acquire any such share, including any debt security
convertible into or exchangeable for any such share), at a price less than the
Current Market Price of such share, then, and in each such event the Company
shall simultaneously pay on each then outstanding share of Series A
2
Preferred Stock of the Company a distribution, in like kind, of 1,000 times such
distribution paid on a share of Common Stock (subject to the provisions for
adjustment hereinafter set forth). The dividends and distributions on the Series
A Preferred Stock to which holders thereof are entitled pursuant to clause (i)
of the first sentence of this paragraph and the second sentence of this
paragraph are hereinafter referred to as "Participating Dividends," and the
multiple of such cash and noncash dividends on the Common Stock applicable to
the determination of the Participating Dividends, which shall be 1,000 initially
but shall be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Dividend Multiple". In the event the Company shall at any
time after March 26, 1999 (the "Effective Date") declare or pay any dividend or
make any distribution on Common Stock payable in shares of Common Stock, or
effect a subdivision or split or a combination, consolidation or reverse split
of the outstanding shares of Common Stock into a greater or lesser number of
shares of Common Stock, or issue any of its capital stock in a reclassification
of the Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then in each such case the Dividend Multiple thereafter applicable
to the determination of the amount of Participating Dividends which holders of
shares of Series A Preferred Stock shall be entitled to receive shall be the
Dividend Multiple applicable immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
3
(B) Except as otherwise provided for or fixed by or pursuant to the
provisions of Article Fourth of the Certificate of Incorporation of the Company
relating to the rights of holders of any class or series of stock having a
preference over the Common Stock as to dividends, the Company shall declare each
Participating Dividend at the same time it declares any cash or noncash dividend
or distribution on the Common Stock in respect of which a Participating Dividend
is required to be paid. No cash or noncash dividend or distribution on the
Common Stock in respect of which a Participating Dividend is required shall be
paid or set aside for payment on the Common Stock unless a Participating
Dividend in respect of such dividend or distribution on the Common Stock shall
be simultaneously paid or set aside for payment on the Series A Preferred Stock.
(C) Preferential Dividends shall begin to accumulate on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issuance of any shares of Series A Preferred Stock.
Accumulated but unpaid Preferential Dividends shall cumulate but shall not bear
interest. Preferential Dividends paid on the shares of Series A Preferred Stock
in an amount less than the total amount of such dividends at the time
accumulated and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
Section 3. Voting Rights. The holders of shares of Series A Preferred
-------------
Stock shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to 1,000
votes on all
4
matters submitted to a vote of the stockholders of the Company. The number of
votes which a holder of Series A Preferred Stock is entitled to cast, as the
same may be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Vote Multiple." In the event the Company shall at any time
after the Effective Date declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding shares of Common Stock into a
greater or lesser number of shares of Common Stock, or issue any of its capital
stock in a reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then in each such case the
Vote Multiple thereafter applicable to the determination of the number of votes
per share to which holders of shares of Series A Preferred Stock shall be
entitled after such event shall be the Vote Multiple immediately prior to such
event multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation, in any resolution or resolutions of the Board of Directors of the
Company providing for the issue of any other series of Preferred Stock or by
law, the holders of shares of Series A Preferred Stock, the holders of shares of
Common Stock and the holders of shares of any other class or series of capital
stock of the Company entitled to vote generally for the election of directors
shall vote together as one class on all matters submitted to a vote of
stockholders of the Company.
5
(C) In the event that the Preferential Dividends accrued on the
Series A Preferred Stock for four or more consecutive quarterly periods shall
not have been declared and paid or set apart for payment, the holders of record
of the Series A Preferred Stock, voting together with the holders of record of
any other series of Preferred Stock of the Company which shall then have the
right, expressly granted by the Certificate of Incorporation of the Company or
in any resolution or resolutions of the Board of Directors of the Company
providing for the issue of such shares of Preferred Stock, to elect directors
upon such a default in the payment of dividends by the Company shall have the
right, at the next meeting of stockholders called for the election of directors,
voting together as a class, to elect two members to the Board of Directors,
which directors shall be in addition to the number provided for pursuant to the
Company's Bylaws prior to such event, to serve until the next Annual Meeting and
until their successors are elected and qualified or their earlier resignation,
removal or incapacity or until such earlier time as all accrued and unpaid
Preferential Dividends upon the outstanding shares of Series A Preferred Stock
shall have been paid (or set aside for payment) in full. The holders of shares
of Series A Preferred Stock shall continue to have the right to elect directors
as provided by the immediately preceding sentence until all accrued and unpaid
Preferential Dividends upon the outstanding shares of Series A Preferred Stock
shall have been paid (or set aside for payment) in full. Such directors may be
removed and replaced by such stockholders, and vacancies in such directorships
may be filled only by such stockholders (or by the remaining director elected by
such stockholders, if there be one) in the manner permitted by law. Subject to
the foregoing, any directors elected pursuant to this paragraph 3(C) shall be
6
elected annually and shall not constitute members of any Class of directors as
contemplated by Article Sixth of the Company's Certificate of Incorporation.
(D) Except as otherwise required by law or set forth herein, holders
of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote as
set forth herein) for the taking of any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever Preferential Dividends or Participating Dividends are in
arrears or the Company shall be in default in payment thereof, thereafter and
until all accrued and unpaid Preferential Dividends and Participating Dividends,
whether or not declared, on shares of Series A Preferred Stock outstanding shall
have been paid or set aside for payment in full, and in addition to any and all
other rights which any holder of shares of Series A Preferred Stock may have in
such circumstances, the Company shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration, any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends or make any other distributions on any
shares of stock ranking on a parity as to dividends with the Series A
Preferred Stock, unless dividends are paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are payable or
in arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
7
(iii) except as permitted by subparagraph (iv) of this paragraph (A),
redeem or purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, provided that
the Company may at any time redeem, purchase or otherwise acquire shares of
any such parity stock in exchange for shares of any stock of the Company
ranking junior (both as to dividends and upon liquidation, dissolution or
winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred Stock (either as to dividends or upon liquidation,
dissolution or winding up), except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company ranking junior to the Series A Preferred Stock unless the Company could,
under paragraph (A) of this Section 4, purchase or otherwise acquire such shares
at such time and in such manner.
8
(C) The Company shall not issue any shares of Series A Preferred
Stock except upon exercise of Rights issued pursuant to that certain Rights
Agreement between the Company and the Rights Agent, a copy of which is on file
with the Secretary of the Company at the principal executive office of the
Company and shall be made available to holders of record of Common Stock or
Series A Preferred Stock without charge upon written request therefor addressed
to the Secretary of the Company. Notwithstanding the foregoing sentence, nothing
contained in the provisions hereof shall prohibit or restrict the Company from
issuing for any purpose any series of Preferred Stock with rights and privileges
similar to, different from, or greater than, those of the Series A Preferred
Stock.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
upon their retirement and cancellation shall become authorized but unissued
shares of Preferred Stock, without designation as to series, and such shares may
be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
Section 6. Liquidation, Dissolution or Winding Up. Upon any voluntary
--------------------------------------
or involuntary liquidation, dissolution or winding up of the Company, no
distribution shall be made (i) to the holders of shares of stock ranking junior
to the Series A Preferred Stock (either as to dividends or upon liquidation,
dissolution or winding up) unless the holders of shares of Series A Preferred
Stock shall have received, subject to adjustment as hereinafter provided, the
greater of (A) $1,000 ($1.00 per one one-thousandth of a
9
share) plus an amount equal to all accumulated and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment, and
(B) the amount equal to 1,000 times the aggregate amount to be distributed per
share to holders of Common Stock, as the same may be adjusted as hereinafter
provided, or (ii) to the holders of stock ranking on a parity upon liquidation,
dissolution or winding up with the Series A Preferred Stock, unless
simultaneously therewith distributions are made ratably on the Series A
Preferred Stock and all other shares of such parity stock in proportion to the
total amounts to which the holders of shares of Series A Preferred Stock are
entitled under clause (i)(A) of this sentence and to which the holders of such
parity shares are entitled, in each case upon such liquidation, dissolution or
winding up. The amount to which holders of Series A Preferred Stock shall be
entitled upon liquidation, dissolution or winding up of the Company pursuant to
clause (i)(B) of the foregoing sentence is hereinafter referred to as the
"Participating Liquidation Amount," and the multiple of the amount to be
distributed to holders of shares of Common Stock upon the liquidation,
dissolution or winding up of the Company applicable pursuant to said clause to
the determination of the Participating Liquidation Amount, which shall be 1,000
but may be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Liquidation Multiple." In this event the Company shall at
any time after the Effective Date declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, or issue any of
its capital stock in a reclassification of the Common Stock (including any such
reclassification in connection with a
10
consolidation or merger in which the Company is the continuing or surviving
corporation), then in each such case the Liquidation Multiple thereafter
applicable to the determination of the Participating Liquidation Amount to which
holders of Series A Preferred Stock shall be entitled after such event shall be
the Liquidation Multiple applicable immediately prior to such event multiplied
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 7. Certain Reclassifications and Other Events.
------------------------------------------
(A) In the event that holders of shares of Common Stock receive after
the Effective Date, in respect of their shares of Common Stock any share of
capital stock of the Company (other than any share of Common Stock of the
Company), whether by way of reclassification, recapitalization, reorganization,
dividend or other distribution or otherwise ("Transaction"), then in each such
event the dividend rights, voting rights and rights upon the liquidation,
dissolution or winding up of the Company of the shares of Series A Preferred
Stock shall be adjusted so that after such event the holders of Series A
Preferred Stock shall be entitled, in respect of each share of Series A
Preferred Stock held, in addition to such rights in respect thereof to which
such holder was entitled immediately prior to such adjustment, to (i) such
additional dividends as equal the Dividend Multiple in effect immediately prior
to such Transaction multiplied by the additional dividends which the holder of a
share of Common Stock shall be entitled to receive by virtue of the receipt in
the Transaction of such capital stock, (ii) such additional voting rights as
equal the Vote Multiple in effect immediately prior to such
11
Transaction multiplied by the additional voting rights which the holder of a
share of Common Stock shall be entitled to receive by virtue of the receipt in
the Transaction of such capital stock and (iii) such additional distributions
upon liquidation, dissolution or winding up of the Company as equal the
Liquidation Multiple in effect immediately prior to such Transaction multiplied
by the additional amount which the holder of a share of Common Stock shall be
entitled to receive upon liquidation, dissolution or winding up of the Company
by virtue of the receipt in the Transaction of such capital stock, as the case
may be, all as provided by the terms of such capital stock.
(B) In the event that holders of shares of Common Stock receive after
the Effective Date, in respect of their shares of Common Stock any right or
warrant to purchase Common Stock (including as such a right, for all purposes of
this paragraph, any security convertible into or exchangeable for Common Stock)
at a purchase price per share less than the Current Market Price (as hereinafter
defined) of a share of Common Stock on the date of issuance of such right or
warrant, then in each such event the dividend rights, voting rights and rights
upon the liquidation, dissolution or winding up of the Company of the shares of
Series A Preferred Stock shall each be adjusted so that after such event the
Dividend Multiple, the Vote Multiple and the Liquidation Multiple shall each be
the product of the Dividend Multiple, the Vote Multiple and the Liquidation
Multiple, as the case may be, in effect immediately prior to such event
multiplied by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding immediately before such issuance of rights or warrants
plus the maximum number of shares of Common Stock which could be acquired upon
exercise in full of all such rights or warrants and the denominator of which
shall be the
12
number of shares of Common Stock outstanding immediately before such issuance of
rights or warrants plus the number of shares of Common Stock which could be
purchased, at the Current Market Price of the Common Stock at the time of such
issuance, by the maximum aggregate consideration payable upon exercise in full
of all such rights or warrants.
(C) In the event that holders of shares of Common Stock receive after
the Effective Date in respect of their shares of Common Stock any right or
warrant to purchase capital stock of the Company (other than shares of Common
Stock), including as such a right, for all purposes of this paragraph, any
security convertible into or exchangeable for capital stock of the Company,
(other than Common Stock), at a purchase price per share less than the Fair
Market Value of such shares of capital stock on the date of issuance of such
right or warrant, then in each such event the dividend rights, voting rights and
rights upon liquidation, dissolution or winding up of the Company of the shares
of Series A Preferred Stock shall each be adjusted so that after such event each
holder of a share of Series A Preferred Stock shall be entitled, in respect of
each share of Series A Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled immediately prior to such
event, to receive (i) such additional dividends as equal the Dividend Multiple
in effect immediately prior to such event multiplied, first, by the additional
dividends to which the holder of a share of Common Stock shall be entitled upon
exercise of such right or warrant by virtue of the capital stock which could be
acquired upon such exercise and multiplied again by the Discount Fraction (as
hereinafter defined), (ii) such additional voting rights as equal the Vote
Multiple in effect immediately prior to such event multiplied, first, by
13
the additional voting rights to which the holder of a share of Common Stock
shall be entitled upon exercise of such right or warrant by virtue of the
capital stock which could be acquired upon such exercise and multiplied again by
the Discount Fraction and (iii) such additional distribution upon liquidation,
dissolution or winding up of the Company as equal the Liquidation Multiple in
effect immediately prior to such event multiplied, first, by the additional
amount which the holder of a share of Common Stock shall be entitled to receive
upon liquidation, dissolution or winding up of the Company upon exercise of such
right or warrant by virtue of the capital stock which could be acquired upon
such exercise and multiplied again by the Discount Fraction. For purposes of
this paragraph, the "Discount Fraction" shall be a fraction the numerator of
which shall be the difference between the Current Market Price of a share of the
capital stock subject to a right or warrant distributed to holders of shares of
Common Stock as contemplated by this paragraph immediately after the
distribution thereof and the purchase price per share for such share of capital
stock pursuant to such right or warrant and the denominator of which shall be
the Current Market Price of a share of such capital stock immediately after the
distribution of such right or warrant.
(D) For purposes of this Certificate of Designations, the "Current
Market Price" of a share of capital stock of the Company (including a share of
Common Stock) on any date shall be deemed to be the average of the daily closing
price per share thereof over the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however, that, in
the event that such Current Market Price of any such share of capital stock is
determined during a period which includes any date that is within 30 Trading
Days after (i) the ex-dividend date for
14
a dividend or distribution on stock payable in shares of such stock or
securities convertible into shares of such stock, or (ii) the effective date of
any subdivision, split, combination, consolidation, reverse stock split or
reclassification of such stock, then and in each such event, the Current Market
Price shall be appropriately adjusted by the Board of Directors to reflect the
Current Market Price of such stock to take into account ex-dividend or
post-effective date trading. The closing price for any day shall be the last
sale price, regular way, or, in case, no such sale takes place on such day, the
average of the closing bid and asked prices, regular way (in either case, as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange), or,
if the shares are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the shares are listed or admitted to trading or, if the shares are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or if on any such date the shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the shares selected by the Board of
Directors. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares are listed or admitted to
trading is open for the transaction of business or, if the shares are not listed
or admitted to trading on any
15
national securities exchange, on which the New York Stock Exchange or such other
national securities exchange as may be selected by the Board of Directors is
open. If the shares are not publicly held or not so listed or traded on any day
within the period of 30 Trading Days applicable to the determination of Current
Market Price thereof as aforesaid, "Current Market Price" shall mean the fair
market value thereof per share as determined in good faith by the Board of
Directors. In either case referred to in the foregoing sentence, the
determination of Current Market Price shall be described in a statement filed
with the Secretary of the Company.
Section 8. Consolidation, Merger, etc. In the event that the Company
---------------------------
shall enter into any consolidation, merger, combination or other transaction in
which shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such event each
outstanding share of Series A Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and other property (payable in like kind), as the case may be,
for which or into which each share of Common Stock is changed or exchanged
multiplied by the highest of the Dividend Multiple, the Vote Multiple or the
Liquidation Multiple in effect immediately prior to such event.
Section 9. Effective Time of Adjustments.
-----------------------------
(A) Adjustments to the Series A Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event requiring
such adjustments occurs.
(B) The Company shall give prompt written notice to each holder of a
share of Series A Preferred Stock of the effect on any shares of any adjustment
to the
16
dividend rights, voting rights or rights upon liquidation, dissolution or
winding up of the Company required by the provisions hereof. Notwithstanding the
foregoing sentence, the failure of the Company to give such notice shall not
affect the validity of or the force or effect of or the requirement for such
adjustment.
Section 10. No Redemption. The shares of Series A Preferred Stock
-------------
shall not be redeemable at the option of the Company or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Company may acquire
shares of Series A Preferred Stock in any other manner permitted by law, the
provisions of the Certificate of Designations setting forth the rights, powers
and preferences of the Series A Preferred Stock and the Certificate of
Incorporation of the Company.
Section 11. Ranking. Unless otherwise provided in the Certificate of
-------
Incorporation or a certificate of designations relating to a subsequent series
of Preferred Stock of the Company, the Series A Preferred Stock shall rank
junior to all other series of the Company's Preferred Stock as to the payment of
dividends and the distribution of assets on liquidation, dissolution or winding
up, and senior to the Common Stock.
Section 12. Amendment. After the Distribution Date (as defined in the
---------
Rights Agreement), the provisions of the Certificate of Designations setting
forth the rights, powers and preferences of the Series A Preferred Stock and the
Certificate of Incorporation shall not be amended in any manner which would
materially affect the rights, privileges or powers of the Series A Preferred
Stock without, in addition to any other vote of stockholders required by law,
the affirmative vote of the holders of 66 2/3% of more of the outstanding shares
of Series A Preferred Stock, voting together as a single class.
17
EXHIBIT B
CERTIFICATE OF DESIGNATIONS
OF
SERIES B ESOP CONVERTIBLE PREFERRED STOCK
OF
J. C. PENNEY COMPANY, INC.
Pursuant to Section 151 of the
Delaware General Corporation Law
J. C. Penney Company, Inc. (f/k/a J. C. Penney Holdings, Inc.), a
corporation organized and existing under the Laws of the State of Delaware (the
"Company"), DOES HEREBY CERTIFY that, pursuant to the authority conferred upon
the Board of Directors by its Certificate of Incorporation and the provisions of
Section 151(g) of the General Corporation Law of the State of Delaware, the
Board of Directors adopted the following resolution:
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Company in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Company be, and it hereby is,
created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional or other special rights of the
shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
Section 1. Designation and Amount; Special Purpose Restricted Transfer
------- -----------------------------------------------------------
Issue.
- -----
(A) The shares of this series of Preferred Stock shall be designated
as Series B ESOP Convertible Preferred Stock ("Series B Preferred Stock") and
the number of shares constituting such series shall be 1,400,000.
(B) Shares of Series B Preferred Stock shall be issued only to a
trustee acting on behalf of an employee stock ownership plan or other employee
benefit plan of the Company. In the event of any transfer of shares of Series B
Preferred Stock to any person other than any such plan trustee, the shares of
Series B Preferred Stock so transferred, upon such transfer and without any
further action by the Company or the holder, shall be automatically converted
into shares of Common Stock on the terms otherwise provided for the conversion
of shares of Series B Preferred Stock into shares of Common Stock pursuant to
Section 5 hereof and no such transferee shall have any of the voting powers,
preferences and relative, participating, optional or special rights ascribed to
shares of Series B Preferred Stock hereunder but, rather, only the powers and
rights pertaining to the Common Stock into which such shares of Series B
Preferred Stock shall be so converted. Certificates representing shares of
Series B Preferred Stock shall be legended to reflect such restrictions on
transfer. Notwithstanding the foregoing provisions of this paragraph (B) of
Section 1, shares of Series B Preferred Stock (i) may be converted into shares
of Common Stock as
provided by Section 5 hereof and the shares of Common Stock issued upon such
conversion may be transferred by the holder thereof as permitted by law and (ii)
shall be redeemable by the Company upon the terms and conditions provided by
Sections 6, 7 and 8 hereof.
Section 2. Dividends and Distributions.
- ------- ----------------------------
(A) Subject to the provisions for adjustment hereinafter set forth,
the holders of shares of Series B Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefor, cash dividends ("Preferred Dividends") in an amount per
share equal to $47.40 per share per annum, and no more, payable semi-annually,
one-half on the first day of January and one-half on the first day of July of
each year (each a "Dividend Payment Date") commencing on January 1, 1989, to
holders of record at the start of business on such Dividend Payment Date.
Preferred Dividends shall begin to accrue on outstanding shares of Series B
Preferred Stock from the date of issuance of such shares of Series B Preferred
Stock. Preferred Dividends shall accrue on a daily basis whether or not the
Company shall have earnings or surplus at the time, but Preferred Dividends
accrued after January 1, 1989 on the shares of Series B Preferred Stock for any
period less than a full semi-annual period between Dividend Payment Dates shall
be computed on the basis of a 360-day year of 30-day months. A fully semi-annual
dividend payment of $23.70 per share shall accrue for the period from the date
of issuance until June 30, 2002. Accumulated but unpaid Preferred Dividends
shall cumulate as of the Dividend Payment Date on which they first become
payable, but no interest shall accrue on accumulated but unpaid Preferred
Dividends.
(B) So long as any Series B Preferred Stock shall be outstanding, no
dividend shall be declared or paid or set apart for payment on any other series
of stock ranking on a parity with the Series B Preferred Stock as to dividends,
unless there shall also be or have been declared and paid or set apart for
payment on the Series B Preferred Stock, like dividends for all dividend payment
periods of the Series B Preferred Stock ending on or before the dividend payment
date of such parity stock, ratably in proportion to the respective amounts of
dividends accumulated and unpaid through such dividend payment period on the
Series B Preferred Stock and accumulated and unpaid or payable on such parity
stock through the dividend payment period on such parity stock next preceding
such dividend payment date. In the event that full cumulative dividends on the
Series B Preferred Stock have not been declared and paid or set apart for
payment when due, 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 or other retirement of any other class of stock or
series thereof of the Company ranking, as to dividends or as to distributions in
the event of a liquidation, dissolution or winding-up of the Company, junior to
the Series B Preferred Stock until full cumulative dividends on the Series B
Preferred Stock shall have been paid or declared and provided for; provided,
however, that the foregoing shall not apply to (i) any dividend payable solely
in any shares of any stock ranking, as to dividends or as to distributions in
the event of a liquidation, dissolution or
2
winding-up of the Company, junior to the Series B Preferred Stock, or (ii) the
acquisition of shares of any stock ranking, as to dividends or as to
distributions in the event of a liquidation, dissolution or winding up of the
Company, junior to the Series B Preferred Stock either (A) pursuant to any
employee or director incentive or benefit plan or arrangement (including any
employment, severance or consulting agreement) of the Company or any subsidiary
of the Company heretofore or hereafter adopted or (B) in exchange solely for
shares of any other stock ranking junior to the Series B Preferred Stock.
Section 3. Voting Rights. The holders of shares of Series B Preferred
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Stock shall have the following voting rights:
(A) The holders of Series B Preferred Stock shall be entitled to vote
on all matters submitted to a vote of the holders of Common Stock of the
Company, voting together with the holders of Common Stock as one class. Each
share of the Series B Preferred Stock shall be entitled to the number of votes
equal to the number of shares of Common Stock into which such share of Series B
Preferred Stock could be converted on the record date for determining the
stockholders entitled to vote, rounded to the nearest one-tenth of a vote; it
being understood that whenever the "Conversion Price" (as defined in Section 5
hereof) is adjusted as provided in Section 9 hereof, the voting rights of the
Series B Preferred Stock shall also be similarly adjusted.
(B) Except as otherwise required by law or set forth herein, holders
of Series B Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for the taking of any
corporate action; provided, however, that the vote of at least 66-2/3% of the
outstanding shares of Series B Preferred Stock, voting separately as a series,
shall be necessary to adopt any alteration, amendment or repeal of any provision
of the Restated Certificate of Incorporation of the Company, as amended, or this
Resolution (including any such alteration, amendment or repeal effected by any
merger or consolidation in which the Company is the surviving or resulting
corporation) if such amendment, alteration or repeal would alter or change the
powers, preferences or special rights of the shares of Series B Preferred Stock
so as to affect them adversely.
Section 4. Liquidation, Dissolution or Winding Up.
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(A) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of Series B Preferred Stock shall be
entitled to receive out of assets of the Company which remain after satisfaction
in full of all valid claims of creditors of the Company and which are available
for payment to stockholders and subject to the rights of the holders of any
stock of the Company ranking senior to or on a parity with the Series B
Preferred Stock in respect of distributions upon liquidation, dissolution or
winding up of the Company, before any amount shall be paid or distributed among
the holders of Common Stock or any other shares ranking junior to the Series B
Preferred Stock in respect of distributions upon liquidation, dissolution or
3
winding up of the Company, liquidating distributions in the amount of $600.00
per share, plus an amount equal to all accumulated and unpaid dividends thereon
to the date fixed for distribution, and no more. If upon any liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Series B Preferred Stock and any other stock ranking as to any such
distribution on a parity with the Series B Preferred Stock are not paid in full,
the holders of the Series B Preferred Stock and such other stock shall share
ratably in any distribution of assets in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount to which they are entitled as provided by the foregoing provisions of
this paragraph 4(A), the holders of shares of Series B Preferred Stock shall not
be entitled to any further right or claim to any of the remaining assets of the
Company.
(B) Neither the merger or consolidation of the Company with or into
any other corporation, nor the merger or consolidation of any other corporation
with or into the Company, nor the sale, transfer or lease of all or any portion
of the assets of the Company, shall be deemed to be a dissolution, liquidation
or winding up of the affairs of the Company for purposes of this Section 4, but
the holders of Series B Preferred Stock shall nevertheless be entitled in the
event of any such merger or consolidation to the rights provided by Section 8
hereof.
(C) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, stating the payment date or dates
when, and the place or places where, the amounts distributable to holders of
Series B Preferred Stock in such circumstances shall be payable, shall be given
by first-class mail, postage prepaid, mailed not less than twenty (20) days
prior to any payment date stated therein, to the holders of Series B Preferred
Stock, at the address shown on the books of the Company or any transfer agent
for the Series B Preferred Stock.
Section 5. Conversion into Common Stock.
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(A) A holder of shares of Series B Preferred Stock shall be entitled,
at any time prior to the close of business on the date fixed for redemption of
such shares pursuant to Section 6, 7 or 8 hereof, to cause any or all of such
shares to be converted into shares of Common Stock, initially at a conversion
rate equal to the ratio of $600.00 to the amount which initially shall be $60.00
and which shall be adjusted as hereinafter provided (and, as so adjusted, is
hereinafter sometimes referred to as the "Conversion Price") (that is, a
conversion rate initially equivalent to ten shares of Common Stock for each
share of Series B Preferred Stock so converted but that is subject to adjustment
as the Conversion Price is adjusted as hereinafter provided).
(B) Any holder of shares of Series B Preferred Stock desiring to
convert such shares into shares of Common Stock shall surrender the certificate
or certificates representing the shares of Series B Preferred Stock being
converted, duly assigned or endorsed for transfer to the Company (or accompanied
by duly executed stock powers relating thereto), at the principal executive
office of the Company or the offices of the transfer agent for the Series B
Preferred Stock or such office or offices in the
4
continental United States of an agent for conversion as may from time to time be
designated by notice to the holders of the Series B Preferred Stock by the
Company or the transfer agent for the Series B Preferred Stock, accompanied by
written notice of conversion. Such notice of conversion shall specify (i) the
number of shares of Series B Preferred Stock to be converted and the name or
names in which such holder wishes the certificate or certificates for Common
Stock and for any shares of Series B Preferred Stock not to be so converted to
be issued, and (ii) the address to which such holder wishes delivery to be made
of such new certificates to be issued upon such conversion.
(C) Upon surrender of a certificate representing a share or shares of
Series B Preferred Stock for conversion, the Company shall issue and send by
hand delivery (with receipt to be acknowledged) or by first-class mail, postage
prepaid, to the holder thereof or to such holder's designee, at the address
designated by such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled upon conversion.
In the event that there shall have been surrendered a certificate or
certificates representing shares of Series B Preferred Stock, only part of which
are to be converted, the Company shall issue and deliver to such holder or such
holder's designee a new certificate or certificates representing the number of
shares of Series B Preferred Stock which shall not have been converted.
(D) The issuance by the Company of shares of Common Stock upon a
conversion of shares of Series B Preferred Stock into shares of Common Stock
made at the option of the holder thereof shall be effective as of the earlier of
(i) the delivery to such holder or such holder's designee of the certificates
representing the shares of Common Stock issued upon conversion thereof or (ii)
the commencement of business on the second business day after the surrender of
the certificate or certificates for the shares of Series B Preferred Stock to be
converted, duly assigned or endorsed for transfer to the Company (or accompanied
by duly executed stock powers relating thereto) as provided by this Resolution.
On and after the effective day of conversion, the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock, but no
allowance or adjustment shall be made in respect of dividends payable to holders
of Common Stock in respect of any period prior to such effective date. The
Company shall not be obligated to pay any dividends which shall have been
declared and shall be payable to holders of shares of Series B Preferred Stock
on a Dividend Payment Date if such Dividend Payment Date for such dividend shall
coincide with or be on or subsequent to the effective date of conversion of such
shares.
(E) The Company shall not be obligated to deliver to holders of
Series B Preferred Stock any fractional share or shares of Common Stock issuable
upon any conversion of such shares of Series B Preferred Stock, but in lieu
thereof may make a cash payment in respect thereof in any manner permitted by
law.
5
(F) Whenever the Company shall issue shares of Common Stock upon
conversion of shares of Series B Preferred Stock as contemplated by this Section
5, the Company shall issue together with each such share of Common Stock one
right to purchase Series A Preferred Stock of the Company (or other securities
in lieu thereof) pursuant to the Rights Agreement between the Company and the
Rights Agent, as such agreement may from time to time be amended, or any rights
issued to holders of Common Stock of the Company in addition thereto or in
replacement therefor, whether or not such rights shall be exercisable at such
time, but only if such rights are issued and outstanding and held by other
holders of Common Stock of the Company at such time and have not expired.
(G) The Company shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for issuance upon the
conversion of shares of Series B Preferred Stock as herein provided, free from
any preemptive rights, such number of shares of Common Stock as shall from time
to time be issuable upon the conversion of all the shares of Series B Preferred
Stock then outstanding. The Company shall prepare and shall use its best efforts
to obtain and keep in force such governmental or regulatory permits or other
authorizations as may be required by law, and shall comply with all requirements
as to registration or qualification of the Common Stock, in order to enable the
Company lawfully to issue and deliver to each holder of record of Series B
Preferred Stock such number of shares of its Common Stock as shall from time to
time be sufficient to effect the conversion of all shares of Series B Preferred
Stock then outstanding and convertible into shares of Common Stock.
During the Twelve
Month Period Price Per
Beginning July 2 Share
---------------- ---------
1988.........................$647.40
1989.........................$642.66
1990.........................$637.92
1991.........................$633.18
1992.........................$628.44
1993.........................$623.70
1994.........................$618.96
1995.........................$614.22
1996.........................$609.48
1997.........................$604.74
Section 6. Redemption At the Option of the Company.
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(A) The Series B Preferred Stock shall be redeemable, in whole or in
part, at the option of the Company at any time after July 1, 1991 or on or
before July 1991 if permitted by paragraph (C) or (D) of this Section 6, at the
following redemption prices: $600.00 per share, plus, in each case, an amount
equal to all accumulated and unpaid dividends thereon to the date fixed for
redemption. Payment of the redemption price
6
shall be made by the Company in cash or shares of Common Stock, or a combination
thereof, as permitted by paragraph (E) of this Section 6. From and after the
date fixed for redemption, dividends on shares of Series B Preferred Stock
called for redemption will cease to accrue, such shares will no longer be deemed
to be outstanding and all rights in respect of such shares of the Company shall
cease, except the right to receive the redemption price. If less than all of the
outstanding shares of Series B Preferred Stock are to be redeemed, the Company
shall either redeem a portion of the shares of each holder determined pro rata
based on the number of shares held by each holder or shall select the shares to
be redeemed by lot, as may be determined by the Board of Directors of the
Company.
(B) Unless otherwise required by law, notice of redemption will be
sent to the holders of Series B Preferred Stock at the address shown on the
books of the Company or any transfer agent for the Series B Preferred Stock by
first class mail, postage prepaid, mailed not less than twenty (20) days nor
more than sixty (60) days prior to the redemption date. Each such notice shall
state: (i) the redemption date; (ii) the total number of shares of the Series B
Preferred Stock to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the conversion rights of the shares to be redeemed,
the period within which conversion rights may be exercised, and the Conversion
Price and number of shares of Common Stock issuable upon conversion of a share
of Series B Preferred Stock at the time. Upon surrender of the certificates for
any shares so called for redemption and not previously converted (properly
endorsed or assigned for transfer, if the Board of Directors of the Company
shall so require and the notice shall so state), such shares shall be redeemed
by the Company at the date fixed for redemption and at the redemption price set
forth in this Section 6.
(C) In the event of a change in the federal tax law of the United
States of America which has the effect of precluding the Company from claiming
any of the tax deductions for dividends paid on the Series B Preferred Stock
when such dividends are used as provided under Section 404(k)(2) of the Internal
Revenue Code of 1986, as amended and in effect on the date shares of Series B
Preferred Stock are initially issued, the Company may, in its sole discretion
and notwithstanding anything to the contrary in paragraph (A) of this Section 6,
elect to redeem such shares for the amount payable in respect of the shares upon
liquidation of the Company pursuant to Section 4 hereof.
(D) Notwithstanding anything to the contrary in paragraph (A) of this
Section 6, the Company may elect to redeem any or all of the shares of Series B
Preferred Stock at any time on or prior to July 1, 1991 on the terms and
conditions set forth in paragraphs (A) and (B) of this Section 6, if the last
reported sales price, regular way, of a share of Common Stock, as reported on
the New York Stock Exchange Composite Tape or, if the Common Stock is not listed
or admitted to trading on the New
7
York Stock Exchange, on the principal national securities exchange on which such
stock is listed or admitted to trading or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, on the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or, if the Common Stock is not quoted on such
National Market System, the average of the closing bid and asked prices in
over-the-counter market as reported by NASDAQ, for at least twenty (20) trading
days within a period of thirty (30) consecutive trading days ending within five
(5) days of the notice of redemption equals or exceeds one hundred fifty percent
(150%) of the Conversion Price (giving effect equitably in making such
calculation to any adjustments required by Section 9 hereof).
(E) The Company, at its option, may make payment of the redemption
price required upon redemption of shares of Series B Preferred Stock in cash or
in shares of Common Stock, or in a combination of such shares and cash, any such
shares to be valued for such purpose at their Fair Market Value (as defined in
paragraph (G) of Section 9 hereof, provided, however, that in calculating their
Fair Market Value the Adjustment Period shall be deemed to be the five (5)
consecutive trading days preceding, and including, the date of redemption).
Section 7. Other Redemption Rights.
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Shares of Series B Preferred Stock shall be redeemed by the Company
for cash or, if the Company so elects, in shares of Common Stock, or a
combination of such shares and cash, any such shares of Common Stock to be
valued for such purpose as provided by paragraph (E) of Section 6, at a
redemption price of $600.00 per share plus accumulated and unpaid dividends
thereon to the date fixed for redemption, at the option of the holder, at any
time and from time to time upon notice to the Company given not less than five
(5) business days prior to the date fixed by the holder in such notice for such
redemption, when and to the extent necessary (i) for such holder to provide for
distributions required to be made under, or to satisfy an Investment election
provided to participants in accordance with, the J. C. Penney Company, Inc.
Savings, Profit-Sharing and Stock Ownership Plan, dated and effective as of
August 22, 1988, as the same may be amended, or any successor plan (the "plan")
to participants in the Plan or (ii) for such holder to make payment of
principal, interest or premium due and payable (whether as scheduled or upon
acceleration) on the 8.17% ESOP Notes Due July 1, 1998 of the trust under the
Plan or any indebtedness incurred by the holder for the benefit of the Plan.
Section 8. Consolidation, Merger, etc,
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(A) In the event that the Company shall consummate any consolidation
or merger or similar transaction, however named, pursuant to which the
outstanding shares of Common Stock are by operation of law exchanged solely for
or changed, reclassified or converted solely into stock of any successor or
resulting company (including the Company) that constitutes "qualifying employer
securities" with respect to a holder of Series B Preferred Stock within the
meaning of Section 409(l) of the Internal
8
Revenue Code of 1986, as amended, and Section 407(c)(5) of the Employee
Retirement Income Security Act of 1974, as amended, or any successor provisions
of law, and, if applicable, for a cash payment in lieu of fractional shares, if
any, the shares of Series B Preferred Stock of such holder shall be assumed by
and shall become preferred stock of such successor or resulting company, having
in respect of such company insofar as possible the same powers, preferences and
relative, participating, optional or other special rights (including the
redemption rights provided by Sections 6, 7 and 8 hereof), and the
qualifications, limitations or restrictions thereon, that the Series B Preferred
Stock had immediately prior to such transaction, except that after such
transaction each share of the Series B Preferred Stock shall be convertible,
otherwise on the terms and conditions provided by Section 5 hereof, into the
qualifying employer securities so receivable by a holder of the number of shares
of Common Stock into which such shares of Series B Preferred Stock could have
been converted immediately prior to such transaction if such holder of Common
Stock failed to exercise any rights of election to receive any kind or amount of
stock, securities, cash or other property (other than such qualifying employer
securities and a cash payment, if applicable, in lieu of fractional shares)
receivable upon such transaction (provided that, if the kind or amount of
qualifying employer securities receivable upon such transaction is not the same
for each non-electing share, then the kind and amount of qualifying employer
securities receivable upon such transaction for each non-electing share shall be
the kind and amount so receivable per share by a plurality of the non-electing
shares). The rights of the Series B Preferred Stock as preferred stock of such
successor or resulting company shall successively be subject to adjustments
pursuant to Section 9 hereof after any such transaction as nearly equivalent to
the adjustments provided for by such section prior to such transaction. The
Company shall not consummate any such merger, consolidation or similar
transaction unless all then outstanding shares of the Series B Preferred Stock
shall be assumed and authorized by the successor or resulting company as
aforesaid.
(B) In the event that the Company shall consummate any consolidation
or merger or similar transaction, however named, pursuant to which the
outstanding shares of Common Stock are by operation of law exchanged for or
changed, reclassified or converted into other stock or securities or cash or any
other property, or any combination thereof, other than any such consideration
which is constituted solely of qualifying employer securities (as referred to in
paragraph (A) of this Section 8) and cash payments, if applicable, in lieu of
fractional shares, outstanding shares of Series B Preferred Stock shall, without
any action on the part of the Company or any holder thereof (but subject to
paragraph (C) of this Section 8), be deemed converted by virtue of such merger,
consolidation or similar transaction immediately prior to such consummation into
the number of shares of Common Stock into which such shares of Series B
Preferred Stock could have been converted at such time and each share of Series
B Preferred Stock shall, by virtue of such transaction and on the same terms as
apply to the holders of Common Stock, be converted into or exchanged for the
aggregate amount of stock, securities, cash or other property (payable in like
kind) receivable by a holder of the number of shares of Common Stock into which
such shares of Series B Preferred Stock could have been converted immediately
prior to
9
such transaction if such holder of Common Stock failed to exercise any rights of
election as to the kind or amount of stock, securities, cash or other property
receivable upon such transaction (provided that, if the kind or amount of stock,
securities, cash or other property receivable upon such transaction is not the
same for each non-electing share, then the kind and amount of stock, securities,
cash or other property receivable upon such transaction for each non-electing
share shall be the kind and amount so receivable per share by a plurality of the
non-electing shares).
(C) In the event the Company shall enter into any agreement providing
for any consolidation or merger or similar transaction described in paragraph
(B) of this Section 8, then the Company shall as soon as practicable thereafter
(and in any event at least ten (10) business days before consummation of such
transaction) give notice of such agreement and the material terms thereof to
each holder of Series B Preferred Stock and each such holder shall have the
right to elect, by written notice to the Company, to receive, upon consummation
of such transaction (if and when such transaction is consummated), from the
Company or the successor of the Company, in redemption and retirement of such
Series B Preferred Stock, a cash payment equal to the amount payable in respect
of shares of Series B Preferred Stock upon liquidation of the Company pursuant
to Section 4 hereof. No such notice of redemption shall be effective unless
given to the Company prior to the close of business on the fifth business day
prior to consummation of such transaction, unless the Company or the successor
of the Company shall waive such prior notice, but any notice of redemption so
given prior to such time may be withdrawn by notice of withdrawal given to the
Company prior to the close of business on the fifth business day prior to
consummation of such transaction.
Section 9. Anti-dilution Adjustment.
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(A) In the event the Company shall, at any time or from time to time
while any of the shares of the Series B Preferred Stock are outstanding, (i) pay
a dividend or make a distribution in respect of the Common Stock in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
in each case whether by reclassification of shares, recapitalization of the
Company (including a recapitalization effected by a merger or consolidation to
which Section 8 hereof does not apply) or otherwise, the Conversion Price in
effect immediately prior to such action shall be adjusted by multiplying such
Conversion Price by the fraction the numerator of which is the number of shares
of Common Stock outstanding immediately before such event and the denominator of
which is the number of shares of Common Stock outstanding immediately after such
event. An adjustment made pursuant to this paragraph 9(A) shall be given effect,
upon payment of such a dividend or distribution, as of the record date for the
determination of shareholders entitled to receive such dividend or distribution
(on a retroactive basis) and in the case of a subdivision or combination shall
become effective immediately as of the effective date thereof.
(B) In the event that the Company shall, at any time or from time to
time while any of the shares of Series B Preferred Stock are outstanding, issue
to holders of
10
shares of Common Stock as a dividend or distribution, including by way of a
reclassification of shares or a recapitalization of the Company, any right or
warrant to purchase shares of Common Stock (but not including as such a right or
warrant any security convertible into or exchangeable for shares of Common
Stock) at a purchase price per share less than the Fair Market Value (as
hereinafter defined) of a share of Common Stock on the date of issuance of such
right or warrant, then, subject to the provisions of paragraphs (E) and (F) of
this Section 9, the Conversion Price shall be adjusted by multiplying such
Conversion Price by the fraction the numerator of which shall be the number of
shares of Common Stock outstanding immediately before such issuance of rights or
warrants plus the number of shares of Common Stock which could be purchased at
the Fair Market Value of a share of Common Stock at the time of such issuance
for the maximum aggregate consideration payable upon exercise in full of all
such rights or warrants and the denominator of which shall be the number of
shares of Common Stock outstanding immediately before such issuance of rights or
warrants plus the maximum number of shares of Common Stock that could be
acquired upon exercise in full of all such rights and warrants.
(C) In the event the Company shall, at any time or from time to time
while any of the shares of Series B Preferred Stock are outstanding, issue, sell
or exchange shares of Common Stock (other than pursuant to any right or warrant
to purchase or acquire shares of Common Stock (including as such a right or
warrant any security convertible into or exchangeable for shares of Common
Stock) and other than pursuant to any employee or director incentive or benefit
plan or arrangement, including any employment, severance or consulting
agreement, of the Company or any subsidiary of the Company heretofore or
hereafter adopted) for a consideration having a Fair Market Value on the date of
such issuance, sale or exchange less than the Fair Market Value of such shares
on the date of such issuance, sale or exchange, then, subject to the provisions
of paragraphs (E) and (F) of this Section 9, the Conversion Price shall be
adjusted by multiplying such Conversion Price by the fraction the numerator of
which shall be the sum of (i) the Fair Market Value of all the shares of Common
Stock outstanding on the day immediately preceding the first public announcement
of such issuance, sale or exchange plus (ii) the Fair Market Value of the
consideration received by the Company in respect of such issuance, sale or
exchange of shares of Common Stock, and the denominator of which shall be the
product of (i) the Fair Market Value of a share of Common Stock on the day
immediately preceding the first public announcement of such issuance, sale or
exchange multiplied by (ii) the sum of the number of shares of Common Stock
outstanding on such day plus the number of shares of Common Stock so issued,
sold or exchanged by the Company. In the event the Company shall, at any time or
from time to time while any shares of Series B Preferred Stock are outstanding,
issue, sell or, exchange any right or warrant to purchase or acquire shares of
Common Stock (including as such a right or warrant any security convertible into
or exchangeable for shares of Common Stock), other than any such issuance to
holders of shares of Common Stock as a dividend or distribution (including by
way of a reclassification of shares or a recapitalization of the Company) and
other than pursuant to any employee or director incentive or benefit plan or
arrangement (including any employment, severance or consulting agreement) of the
11
Company or any subsidiary of the Company heretofore or hereafter adopted, for a
consideration having a Fair Market Value on the date of such Issuance, sale or
exchange less than the Non-Dilutive Amount (as hereinafter defined), then,
subject to the provisions of paragraphs (E) and (F) of this Section 9, the
Conversion Price shall be adjusted by multiplying such Conversion Price by a
fraction the numerator of which shall be the sum of (i) the Fair Market Value of
all the shares of Common Stock outstanding on the day immediately preceding the
first public announcement of such issuance, sale or exchange plus (ii) the Fair
Market Value of the consideration received by the Company in respect of such
issuance, sale or exchange of such right or warrant plus (iii) the Fair Market
Value at the time of such issuance of the consideration which the Company would
receive upon exercise in full of all such rights or warrants, and the
denominator of which shall be the product of (i) the Fair Market Value of a
share of Common Stock on the day immediately preceding the first public
announcement of such issuance, sale or exchange multiplied by (ii) the sum of
the number of shares of Common Stock outstanding on such day plus the maximum
number of shares of Common Stock which could be acquired pursuant to such right
or warrant at the time of the issuance, sale or exchange of such right or
warrant (assuming shares of Common Stock could be acquired pursuant to such
right or warrant at such time).
(D) In the event the Company shall, at any time or from time to time
while any of the shares of Series B Preferred Stock are outstanding, make an
Extraordinary Distribution (as hereinafter defined) in respect of the Common
Stock, whether by dividend, distribution, reclassification of shares or
recapitalization of the Company (including a recapitalization or
reclassification effected by a merger or consolidation to which Section 8 hereof
does not apply) or effect a Pro Rate Repurchase (as hereinafter defined) of
Common Stock, the Conversion Price in effect immediately prior to such
Extraordinary Distribution or Pro Rata Repurchase shall, subject to paragraphs
(E) and (F) of this Section 9, be adjusted by multiplying such Conversion Price
by the fraction the numerator of which is (i) the product of (x) the number of
shares of Common Stock outstanding immediately before such Extraordinary
Distribution or Pro Rate Repurchase multiplied by (y) the Fair Market Value (as
herein defined) of a share of Common Stock on the record date with respect to an
Extraordinary Distribution, or on the applicable expiration date (including all
extensions thereof) of any tender offer which is a Pro Rata Repurchase, or on
the date of purchase with respect to any Pro Rata Repurchase which is not a
tender offer, as the case may be, minus (ii) the Fair Market Value of the
Extraordinary Distribution or the aggregate purchase price of the Pro Rata
Repurchase, as the case may be, and the denominator of which shall be the
product of (A) the number of shares of Common Stock outstanding immediately
before such Extraordinary Dividend or Pro Rata Repurchase minus, in the case of
a Pro Rata Repurchase, the number of shares of Common Stock repurchased by the
Company multiplied by (B) the Fair Market Value of a share of Common Stock on
the record date with respect to an Extraordinary Distribution or on the
applicable expiration date (including all extensions thereof) of any tender
offer which is a Pro Rata Repurchase or on the date of purchase with respect to
any Pro Rata Repurchase which is not a tender offer, as the case may be. The
Company shall send each holder of Series B Preferred Stock (i) notice of its
intent to make any dividend or distribution and (ii) notice of any offer by the
Company to
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make a Pro Rata Repurchase, in each case at the same time as, or as soon as
practicable after, such offer is first communicated (including by announcement
of a record date in accordance with the rules of any stock exchange on which the
Common Stock is listed or admitted to trading) to holders of Common Stock. Such
notice shall indicate the intended record date and the amount and nature of such
dividend or distribution, or the number of shares subject to such offer for a
Pro Rata Repurchase and the purchase price payable by the Company pursuant to
such offer, as well as the Conversion Price and the number of shares of Common
Stock into which a share of Series B Preferred Stock may be converted at such
time.
(E) Notwithstanding any other provisions of this Section 9, the
Company shall not be required to make any adjustment of the Conversion Price
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Conversion Price. Any lesser adjustment shall be carried
forward and shall be made no later than the time of, and together with, the next
subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least one percent
(1%) in the Conversion Price.
(F) If the Company shall make any dividend or distribution on the
Common Stock or issue any Common Stock, other capital stock or other security of
the Company or any rights or warrants to purchase or acquire any such security,
which transaction does not result in an adjustment to the Conversion Price
pursuant to the foregoing provisions of this Section 9, the Board of Directors
of the Company shall consider whether such action is of such a nature that an
adjustment to the Conversion Price should equitably be made in respect of such
transaction. If in such case the Board of Directors of the Company determines
that an adjustment to the Conversion Price should be made, an adjustment shall
be made effective as of such date, as determined by the Board of Directors of
the Company. The determination of the Board of Directors of the Company as to
whether an adjustment to the Conversion Price should be made pursuant to the
foregoing provisions of this paragraph 9(F), and, if so, as to what adjustment
should be made and when, shall be final and binding on the Company and all
stockholders of the Company. The Company shall be entitled to make such
additional adjustments in the Conversion Price, in addition to those required by
the foregoing provisions of this Section 9, as shall be necessary in order that
any dividend or distribution in shares of capital stock of the Company,
subdivision, reclassification or combination of shares of stock of the Company
or any recapitalization of the Company shall not be taxable to holders of the
Common Stock.
(G) For purposes of this Resolution, the following definitions shall
apply:
"Extraordinary Distribution" shall mean any dividend or other
distribution (effected while any of the shares of Series B Preferred Stock are
outstanding) (i) of cash, where the aggregate amount of such cash dividend or
distribution together with the amount of all cash dividends and distributions
made during the preceding period of 12 months, when combined with the aggregate
amount of all Pro Rata Repurchases (for this purpose, including only that
portion of the aggregate purchase price of such
13
Pro Rata Repurchase which is in excess of the Fair Market Value of the Common
Stock repurchased as determined on the applicable expiration date (including all
extensions thereof) of any tender offer or exchange offer which is a Pro Rata
Repurchase, or the date of purchase with respect to any other Pro Rata
Repurchase which is not a tender offer or exchange offer made during such
period), exceeds twelve and one-half percent (12-1/2%) of the aggregate Fair
Market Value of all shares of Common Stock outstanding on the record date for
determining the shareholders entitled to receive such Extraordinary Distribution
and (ii) any shares of capital stock of the Company (other than shares of Common
Stock), other securities of the Company (other than securities of the type
referred to in paragraph (B) of this Section 9), evidences of indebtedness of
the Company or any other person or any other property (including shares of any
subsidiary of the Company), or any combination thereof. The Fair Market Value of
an Extraordinary Distribution for purposes of paragraph (D) of this Section 9
shall be the sum of the Fair Market Value of such Extraordinary Distribution
plus the amount of any cash dividends which are not Extraordinary Distributions
made during such twelve month period and not previously included in the
calculation of an adjustment pursuant to paragraph (D) of this Section 9.
"Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the Company or any other issuer
which are publicly traded, the average of the Current Market Prices (as
hereinafter defined) of such shares or securities for each day of the Adjustment
Period (as hereinafter defined). "Current Market Price" of publicly traded
shares of Common Stock or any other class of capital stock or other security of
the Company or any other issuer for a day shall mean the last reported sales
price, regular way, or, in case no sale takes place on such day, the average of
the reported closing bid and asked prices, regular way, in either case as
reported on the Now York Stock Exchange Composite Tape or, if such security is
not listed or admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which such security is listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, on the NASDAQ National Market System or, if such security
is not quoted on such National Market System, the average of the closing bid and
asked prices on each such day in the over-the-counter market as reported by
NASDAQ or, if bid and asked prices for such security on each such day shall not
have been reported through NASDAQ, the average of the bid and asked prices for
such day as furnished by any New York Stock Exchange member firm regularly
making a market in such security selected for such purpose by the Board of
Directors of the Company or a committee thereof on each trading day during the
Adjustment Period. "Adjustment Period" shall mean the period of five (5)
consecutive trading days, selected by the Board of Directors of the Company or a
committee thereof, during the 20 trading days preceding, and including, the date
as of which the Fair Market Value of a security is to be determined. The "Fair
Market Value" of any security which is not publicly traded or of any other
property shall mean the fair value thereof as determined by an independent
investment banking or appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board of Directors of the
Company or a committee thereof, or, if no such investment banking or appraisal
firm is in the good faith judgment of the Board of Directors or such
14
committee available to make such determination, as determined in good faith by
the Board of Directors of the Company or such committee.
"Non-Dilutive Amount" in respect of an issuance, sale or exchange by
the Company of any right or warrant to purchase or acquire shares of Common
Stock (including any security convertible into or exchangeable for shares of
Common Stock) shall mean the remainder of (i) the product of the Fair Market
Value of a share of Common Stock on the day preceding the first public
announcement of such issuance, sale or exchange multiplied by the maximum number
of shares of Common Stock which could be acquired on such date upon the exercise
in full of such rights and warrants (including upon the conversion or exchange
of all such convertible or exchangeable securities), whether or not exercisable
(or convertible or exchangeable) at such date, minus (ii) the aggregate amount
payable pursuant to such right or warrant to purchase or acquire such maximum
number of shares of Common Stock; provided, however, that in no event shall the
Non-Dilutive Amount be less than zero. For purposes of the foregoing sentence,
in the case of a security convertible into or exchangeable for shares of Common
Stock, the amount payable pursuant to a right or warrant to purchase or acquire
shares of Common Stock shall be the Fair Market Value of such security on the
date of the issuance, sale or exchange of such security by the Company.
"Pro Rata Repurchase" shall mean any purchase of shares of Common
Stock by the Company or any subsidiary thereof, whether for cash, shares of
capital stock of the Company, other securities of the Company, evidences of
indebtedness of the Company or any other person or any other property (including
shares of a subsidiary of the Company), or any combination thereof, effected
while any of the shares of Series B Preferred Stock are outstanding, pursuant to
any tender offer or exchange offer subject to Section 13(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision of law, or pursuant to any other offer available to substantially all
holders of Common Stock; provided, however, that no purchase of shares by the
Company or any subsidiary thereof made in open market transactions shall be
deemed a Pro Rata Repurchase. For purposes of this paragraph 9(G), shares shall
be deemed to have been purchased by the Company or any subsidiary thereof "in
open market transactions" if they have been purchased substantially in
accordance with the requirements of Rule 10b-18 as in effect under the Exchange
Act, on the date shares of Series B Preferred Stock are initially issued by the
Company or on such other terms and conditions as the Board of Directors of the
Company or a committee thereof shall have determined are reasonably designed to
prevent such purchases from having a material effect on the trading market for
the Common Stock.
(H) Whenever an adjustment to the Conversion Price and the related
voting rights of the Series B Preferred Stock is required pursuant to this
Resolution, the Company shall forthwith place on file with the transfer agent
for the Common Stock and the Series B Preferred Stock if there be one, and with
the Secretary of the Company, a statement signed by two officers of the Company
stating the adjusted Conversion Price
15
determined as provided herein and the resulting conversion ratio, and the voting
rights (as appropriately adjusted), of the Series B Preferred Stock. Such
statement shall set forth in reasonable detail such facts as shall be necessary
to show the reason and the manner of computing such adjustment, including any
determination of Fair Market Value involved in such computation. Promptly after
each adjustment to the Conversion Price and the related voting rights of the
Series B Preferred Stock, the Company shall mail a notice thereof and of the
then prevailing conversion ratio to each holder of shares of the Series B
Preferred Stock.
Section 10. Ranking Attributable Capital and Adequacy of Surplus;
---------- -----------------------------------------------------
Retirement of Shares.
- ---------------------
(A) The Series B Preferred Stock shall rank senior to the Series A
Preferred Stock and the Common Stock as to the payment of dividends and the
distribution of assets on liquidation, dissolution and winding up of the
Company, and, unless otherwise provided in the Restated Certificate of
Incorporation of the Company, as amended, or a Certificate of Designations
relating to a subsequent series of Preferred Stock, without par value, of the
Company, the Series B Preferred Stock shall rank junior to all other series of
the Company's Preferred Stock, without par value, as to the payment of dividends
and the distribution of assets on liquidation, dissolution or winding up.
(B) The capital of the Company allocable to the Series B Preferred
Stock for purposes of the Delaware General Corporation Law (the "Corporation
Law") shall be $600.00 per share. In addition to any vote of stockholders
required by law, the vote of the holders of a majority of the outstanding shares
of Series B Preferred Stock shall be required to increase the par value of the
Common Stock or otherwise increase the capital of the Company allocable to the
Common Stock for the purpose of the Corporation Law if, as a result thereof, the
surplus of the Company for purposes of the Corporation Law would be less than
the amount of Preferred Dividends that would accrue on the then outstanding
shares of Series B Preferred Stock during the following three years.
(C) Any shares of Series B Preferred Stock acquired by the Company by
reason of the conversion or redemption of such shares as provided by this
Resolution, or otherwise so acquired, shall be retired as shares of Series B
Preferred Stock and restored to the status of authorized but unissued shares of
preferred stock, without par value, of the Company, undesignated as to series,
and may thereafter be reissued as part of a new series of such preferred stock
as permitted by law.
Section 11. Miscellaneous.
----------- -------------
(A) All notices referred to herein shall be in writing, and all
notices hereunder shall be deemed to have been given upon the earlier of receipt
thereof or three (3) business days after the mailing thereof if sent by
registered mail (unless first-class mail shall be specifically permitted for
such notice under the terms of this
16
Resolution) with postage prepaid, addressed: (i) if to the Company, to its
office at 14841 North Dallas Parkway, Dallas Texas 75240 (Attention: Secretary)
or to the transfer agent for the Series B Preferred Stock, or other agent of the
Company designated as permitted by this Resolution or (ii) if to any holder of
the Series B Preferred Stock or Common Stock, as the case may be, to such holder
at the address of such holder as listed in the stock record books of the Company
(which may include the records of any transfer agent for the Series B Preferred
Stock or Common Stock, as the case may be) or (iii) to such other address as the
Company or any such holder, as the case may be, shall have designated by notice
similarly given.
(B) The term "Common Stock" as used in this Resolution means the
Company's Common Stock of 50(cent) par value, as the same exists at the date of
filing of a Certificate of Designations relating to Series B Preferred Stock or
any other class of stock resulting from successive changes or reclassification
of such Common Stock consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In the event that, at
any time as a result of an adjustment made pursuant to Section 9 of this
Resolution, the holder of any share of the Series B Preferred Stock upon
thereafter surrendering such shares for conversion shall become entitled to
receive any shares or other securities of the Company other than shares of
Common Stock, the Conversion Price in respect of such other shares or securities
so receivable upon conversion of shares of Series B Preferred Stock shall
thereafter be adjusted, and shall be subject to further adjustment from time to
time, in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Stock contained in Section 9 hereof, and the
provisions of Sections 1 through 8 and 10 and 11 of this Resolution with respect
to the Common Stock shall apply on like or similar terms to any such other
shares or securities.
(C) The Company shall pay any and all stock transfer and documentary
stamp taxes that may be payable in respect of any issuance or delivery of shares
of Series B Preferred Stock or shares of Common Stock or other securities issued
on account of Series B Preferred Stock pursuant hereto or certificates
representing such shares or securities. The Company shall not, however, be
required to pay any such tax which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Series B Preferred Stock or
Common Stock or other securities in a name other than that in which the shares
of Series B Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Company the amount of any
such tax or has established, to the satisfaction of the Company, that such tax
has been paid or is not payable.
(D) In the event that a holder of shares of Series B Preferred Stock
shall not by written notice designate the name in which shares of Common Stock
to be issued upon conversion of such shares should be registered or to whom
payment upon
17
redemption of shares of Series B Preferred Stock should be made or the address
to which the certificate or certificates representing such shares, or such
payment, should be sent, the Company shall be entitled to register such shares,
and make such payment, in the name of the holder of such Series B Preferred
Stock as shown on the records of the Company and to send the certificate or
certificates representing such shares, or such payment, to the address of such
holder shown on the records of the Company.
(E) Unless otherwise provided in the Restated Certificate of
Incorporation, as amended, of the Company, all payments in the form of
dividends, distributions on voluntary or involuntary dissolution, liquidation or
winding-up or otherwise made upon the shares of Series B Preferred Stock and any
other stock ranking on a parity with the Series B Preferred Stock with respect
to such dividend or distribution shall be made pro rata, so that amounts paid
per share on the Series B Preferred Stock and such other stock shall in all
cases bear to each other the same ratio that the required dividends,
distributions or payments, as the case may be, then payable per share on the
shares of the Series B Preferred Stock and such other stock bear to each other.
(F) The Company may appoint, and from time to time discharge and
change, a transfer agent for the Series B Preferred Stock. Upon any such
appointment or discharge of a transfer agent, the Company shall send notice
thereof by first-class mail, postage prepaid, to each holder of record of Series
B Preferred Stock.
18