InterDigital Communications Corporation
Amended & Restated
Articles of Incorporation
In compliance with the requirements of the Pennsylvania Business
Corporation Law of 1988, as amended, the Articles of Incorporation of
INTERDIGITAL COMMUNICATIONS CORPORATION are hereby amended and restated in their
entirety to read as follows:
First. The name of the Corporation is InterDigital Communications Corporation.
Second. The location and post office address of its registered office is 781
Third Avenue, King of Prussia, Pennsylvania 19406-1409.
Third. The Corporation is incorporated under the Business Corporation Law of the
Commonwealth of Pennsylvania for the purpose or purposes of engaging in or doing
any lawful act concerning any or all lawful business for which corporations may
be incorporated under the Pennsylvania Business Corporation Law, including but
not limited to manufacturing, owning, using, leasing and dealing in personal
property of every class and description, and acquiring, owning, using and
disposing of real property of any nature whatsoever.
Fourth. The term for which the Corporation is to exist is perpetual.
Fifth. The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is
(i) 100,000,000 shares of Common Stock, $0.01 par value per share ("Common
Stock"), and
(ii) 14,398,600 shares of Preferred Stock, $0.10 par value per share
("Preferred Stock").
The voting rights, designations, preferences, qualifications, privileges,
limitations, options, conversion rights and other special rights (the "Rights
and Preferences") of the shares of the respective classes of stock of the
Corporation are and will be determined as follows:
A. Preferred Stock
The Board of Directors of the Corporation shall have full and
complete authority, by resolution from time to time, to establish one
or more series and to issue shares of Preferred Stock and to fix,
determine and vary the Rights and Preferences of each series of
Preferred Stock, including, but not limited to, dividend rates and
manner of payment, preferential amounts payable upon voluntary or
involuntary liquidation, voting rights, conversion rights, redemption
prices, terms and conditions and sinking fund and stock purchase
prices, terms and conditions.
B. $2.50 Cumulative Convertible Preferred Stock
The series of Preferred Stock, $.10 par value per share, of the
Corporation known as the $2.50 Cumulative Convertible Preferred Stock
shall have the following Rights and Preferences:
Section 1. Designation and Amount. The shares of such series
shall be designated as $2.50 Cumulative Convertible Preferred Stock
(the "Convertible Preferred Stock"), and the number of shares
constituting such series shall be 105,212. Such number of shares may
not be increased, but may be decreased, at any time and from time to
time, by resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Convertible Preferred
Stock to a number less than that of the shares then outstanding.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of preferred stock ranking senior to the
shares of Convertible Preferred Stock with respect to dividends, the
holders of shares of Convertible Preferred Stock, in preference (to
the extent provided in Section 4) to the holders of any and all other
classes of stock, whether common or preferred, including the Common
Stock, par value $.01 per share, of the Corporation (the "Common
Stock"), shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available therefor, semiannual
dividends payable in cash, Common Stock or a combination of cash and
Common Stock, at the Corporation's election in its sole discretion
(subject to the terms of Section 12), as hereinafter provided.
Dividends on each share of Convertible Preferred Stock shall begin to
accrue and be cumulative from the first date of issuance of any such
share and shall accumulate and be payable on the first calendar day of
June and December in each year, commencing December 1, 1987, or, if
such day is not a business day of the Corporation, the next succeeding
business day of the Corporation (each such date being referred to
herein as a "Dividend Payment Date"), at an annual rate of $2.50 per
share of Convertible Preferred Stock, calculated on the basis of a
year of 360 days consisting of twelve 30-day months. The amount of
dividends payable per share for each full dividend period shall be
computed by dividing by two the $2.50 annual rate (rounding such
amount to the nearest cent). If less than six months shall have
elapsed from the first date of issuance of Convertible Preferred Stock
to the first Dividend Payment Date after such issuance, the dividends
payable on such Dividend Payment Date shall be the amount payable on
each subsequent Dividend Payment Date multiplied by a fraction, the
numerator of which is the number of days from the first date of
issuance of the Convertible Preferred Stock to such first Dividend
Payment Date and the denominator of which is 180. If the Corporation
elects to pay all or any portion of a dividend in Common Stock, the
number of shares of Common Stock to be issued by the Company in
payment of such dividend or portion thereof shall be the dollar amount
of the dividend or portion thereof not paid in cash divided by the per
share Computed Price (as defined below) of the Common Stock.
Accumulated but unpaid dividends shall not bear interest. Dividends
paid on shares of Convertible 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. The Board of Directors
may fix a record date for the determination of holders of shares of
Convertible Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be no more
than 50 days prior to the date fixed for the payment thereof.
(B) Notwithstanding the provisions of Section 2(A) above, a
dividend on Convertible Preferred Stock will be payable only in cash
in the following circumstances: (i) to the extent the number of shares
of Common Stock at the time authorized, unissued and unreserved for
all purposes, or held in the Corporation's treasury, is insufficient
to pay the portion of such dividend to be paid in Common Stock; (ii)
to the extent the issuance or delivery of shares of Common Stock in
payment of a dividend on Convertible Preferred Stock would require
registration with or approval of any governmental authority under any
law or regulation, and such registration or approval has not been
effected or obtained; (iii) the Computed Price (as defined below) is
less than the then par value of the Common Stock; (iv) to the extent
the shares of Common Stock to be issued in payment of a dividend on
the Convertible Preferred Stock have not been authorized for listing,
upon official notice of issuance, on any United States national or
regional securities exchange on which such Common Stock is then
listed; or (v) the Common Stock is no longer traded in the over-the
counter market and is not listed on a United States national or
regional securities exchange.
(C) As used herein, the "Computed Price" of a share of Common
Stock shall mean the price equal to the following applicable
percentage of the arithmetic average of the Closing Sale Price (as
defined below) of the Common Stock for the 10 consecutive trading days
ending on the fifth trading day prior to the applicable Dividend
Payment Date: 100%, if the Amount of the Shares (as defined below) is
less than or equal to one-half the Average Dollar Volume Amount (as
defined below); 95%, if the Amount of the Shares is greater than
one-half but less than or equal to one times
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the Average Dollar Volume Amount; 90%, if the Amount of the Shares is
greater than one times but less than or equal to two times the Average
Dollar Volume Amount; 85%, if the Amount of the Shares is greater than
two times but less than or equal to four times the Average Dollar
Volume Amount; 80%, if the Amount of the Shares is greater than four
times but less than or equal to six times the Average Dollar Volume
Amount; or 75%, if the Amount of the Shares is greater than six times
the Average Dollar Volume Amount.
For purposes of this Section 2(C), the "Closing Sale Price" of
the Common Stock on a given day means the closing sale price of (or,
if such price is not reported, the closing bid price for) the Common
Stock on such day, as reported in the composite transactions for this
principal United States securities exchange on which the Common Stock
is traded, or, if the Common Stock is not listed on a United States
national or regional stock exchange, as reported by the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") or the National Quotation Bureau Incorporated (or if the
Common Stock is not so listed and such closing sale and closing bid
price are not reported by NASDAQ or the National Quotation Bureau
Incorporated, then such price shall be determined by the Board of
Directors in good faith, such determination to be conclusive); the
"Amount of the Shares" means the sum of (a) the dollar amount of
dividends to be paid in shares of Common Stock on the Convertible
Preferred Stock on the applicable Dividend Payment Date plus (b) the
dollar amount of dividends and interest paid in shares of Common Stock
during the 60 consecutive calendar days preceding such Dividend
Payment Date (the "Period") on any other securities issued or
guaranteed by the Corporation or any of its subsidiaries plus (c) the
dollar amount of redemptions in respect of any securities issued or
guaranteed by the Corporation or any of its subsidiaries paid or
satisfied in Common Stock during the Period plus (d) the dollar amount
of Common Stock issued during the Period upon any Forced Conversion
(as defined below) or any convertible debt or equity securities
(excluding employee stock options) of the Corporation or any of its
subsidiaries; the "Average Dollar Volume Amount" means one-half of the
sum of the products obtained by multiplying (i) the daily volume of
Common Stock traded for each of the twenty consecutive trading days
ending on the fifth trading day prior to the Dividend Payment Date by
(ii) the Closing Sale Price of the Common Stock on the corresponding
particular trading day; and "Forced Conversion" means conversions (a)
within the period following a notice of redemption and prior to the
redemption date to which such notice relates, excepting redemptions of
the Corporation's Preferred Stock, First Series, (b) within a 90-day
period following a voluntary reduction in the conversion price below
the market price of the Common Stock or (c) pursuant to a provision
which sets the conversion price for a specified period (the
"conversion period") as a percentage (of less than 100%) of the market
price of the Common Stock during the conversion period or during a
period beginning not more than 90 days prior to the first day of such
conversion period.
(D) No interest or sum of money in lieu of interest shall be
payable in respect of any dividend payment or payments which may be
arrears. In the event that two consecutive semi-annual dividends
payable on the Convertible Preferred Stock are in arrears and the full
amount of accumulated dividends due under Section 2(A) above is not
(i) paid or (ii) declared and funds or shares of Common Stock (to the
extent permissible hereunder) sufficient to pay the full amount of
accumulated dividends due under Section 2(A) above set aside for
payment of dividends, within 15 business days after the Dividend
Payment Date of the second consecutive dividend in arrears (any such
occurrence being referred to herein as a "Dividend Default"), the
holder of each share of Convertible Preferred Stock may, on the two
business days following the applicable Penalty Conversion Date
(defined as the thirtieth calendar day after such second consecutive
Dividend Payment Date), at the option of such holder, in lieu of all
dividends which have accrued but remain unpaid (whether or not
declared), and notwithstanding that such Dividend Default may have
been cured subsequent to such period of 15 business days, convert such
share of Convertible Preferred Stock into the number of shares of
Common Stock determined as set forth below (a "Penalty Conversion
Right"). The number of shares of Common Stock into which each share of
Convertible Preferred Stock shall be so convertible upon a Dividend
Default and the exercise of the resulting Penalty Conversion Right
shall be a fraction, rounded to the nearest one hundredth, the
numerator of which is $25.00 plus an amount per share equal to all
accrued and unpaid dividends thereon to
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the applicable Penalty Conversion Date, whether or not declared, and
the denominator of which is seventy-five percent (75%) of the lowest
Closing Sale Price (as previously defined) of the Common Stock during
the period beginning on the second consecutive Dividend Payment Date
immediately preceding the Penalty Conversion Date and ending five
trading days prior to the Penalty Conversion Date (such denominator
being referred to herein as the "Penalty Conversion Price"). Upon the
occurrence of a Dividend Default, the Corporation shall promptly mail
to each holder of shares of Convertible Preferred Stock at such
holder's last address as the same appears on the books of the
Corporation a notice (a) stating that a Dividend Default has occurred,
(b) setting forth the terms of the Penalty Conversion Right and (c)
setting forth the time, place and manner of exercise of such Penalty
Conversion Right.
(E) If (i) a Dividend Default shall have occurred, (ii) a Penalty
Conversion Right with respect to any of the outstanding shares of
Convertible Preferred Stock shall be exercisable in accordance with
the terms of Sections 2(D) and (iii) any of the following
circumstances shall then exist (any such concurrent occurrence of each
of (i), (ii) and (iii) being referred to herein as a "Penalty
Conversion Right Extension"):
(a) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all other purposes or held in the
Corporation's treasury is insufficient to satisfy the
Corporation's obligations with respect to the conversion of
Convertible Preferred Stock pursuant to any such Penalty
Conversion Right; (b) the issuance or delivery of shares of
Common Stock in satisfaction of any such Penalty Conversion Right
would require registration with or approval of any governmental
authority under any law or regulation, and such registration or
approval has not been effected or obtained; (c) the Penalty
Conversion Price is less than the then par value of the Common
Stock; (d) the shares of Common Stock to be issued in payment of
a dividend on the Convertible Preferred Stock have not been
authorized for listing upon official notice of issuance, on any
United States national or regional securities exchange on which
such Common Stock is then listed; or (e) the Common Stock is no
longer traded in the over-the-counter market and is not listed on
a United States national or regional securities exchange (any of
such circumstances (a) through (e) being referred to herein as a
"Penalty Conversion Right Extending Event"),
then the Penalty Conversion Right with respect to the Convertible
Preferred Stock shall not terminate at the end of the two business
days following the Penalty Conversion Date, but shall remain
exercisable at any time until and including the Extended Penalty
Conversion Date (defined as the thirtieth calendar day after the day
on which no Penalty Conversion Right Extending Event shall continue to
exist) in the manner set forth in Section 2(F) (an "Extended Penalty
Conversion Right"). The number of shares of Common Stock into which
each share of Convertible Preferred Stock shall be convertible upon
the exercise of an Extended Penalty Conversion Right shall be a
fraction, rounded to the nearest one-hundredth, the numerator of which
is $25.00 plus an amount per share equal to all accrued and unpaid
dividends thereon, whether or not declared, to the date of the
exercise of such Extended Penalty Conversion Right, and the
denominator of which is seventy-five percent (75%) of the lowest
Closing Sales Price (as defined above) of the Common Stock during the
period beginning on the second consecutive Dividend Payment Date with
respect to which the Dividend Default giving rise to such Extended
Penalty Conversion Right originally occurred and ending five trading
days prior to the Extended Penalty Conversion Date (such denominator
being referred to herein as the "Extended Penalty Conversion Price").
In the event that a Dividend Default shall have occurred and any
Penalty Conversion Price Extending Event shall be in existence, the
Corporation shall promptly mail to each holder of shares of
Convertible Preferred Stock, at such holder's last address as the same
appears on the books of the Corporation, a notice of the existence of
such Dividend Default and Penalty Conversion Right Extending Event,
which notice shall describe the terms upon which an Extended Penalty
Conversion Right may arise and be exercised. Upon the cessation of all
Penalty Conversion Right Extending Events, the Corporation shall
notify each holder in a similar manner of the date upon which the
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Penalty Conversion Right or the Extended Penalty Conversion Right, as
the case may be, shall terminate. Such notice shall set forth the
terms and manner of exercise of such Right.
(F) A holder of shares of Convertible Preferred Stock may
surrender for conversion pursuant to a then exercisable Penalty
Conversion Right or Extended Penalty Conversion Right (either of which
is referred to hereinafter in this Section 2 as a "Conversion Right")
all or any portion of such shares. Holders of Convertible Preferred
Stock desiring to exercise a Conversion Right shall so elect by
presenting to the Corporation at its principal place of business,
within the period permitted to exercise such Conversion Right, their
stock certificates representing the shares of Convertible Preferred
Stock to be so converted pursuant to such conversion right, with the
Notice of Election to Convert printed on the reverse side of such
certificates appropriately completed, together with appropriate
endorsements and transfer documents sufficient to transfer the
Convertible Preferred Stock being converted to the Corporation free of
any adverse interest, and by paying, at that time, any transfer or
similar tax if required pursuant to Section 2(G). A Conversion Right
in respect of shares of Convertible Preferred Stock for which
certificates are not presented in accordance with the terms of this
Section 2(F) within such applicable period of time or in respect of
which the election to exercise the Conversion Right is not made in
accordance with the terms of this Section 2(F) shall cease to be
exercisable, provided, that such a termination of a Conversion Right
shall not prejudice any new Conversion Right that may subsequently
arise in accordance with the terms of Section 2(D) or 2(E). A
conversion pursuant to a Conversion Right shall be deemed to have been
made at the close of business on the day on which the converting
holder presents to the Corporation the certificates for shares of
Convertible Preferred Stock to be converted (assuming that such holder
has satisfied all of the requirements set forth in this Section 2(F)),
and the rights of such holder with respect to any such converted share
shall cease at such time. The person in whose name the Common Stock
certificate is registered shall be treated as a shareholder of record
on and after the day of conversion. On such day, or as soon thereafter
as is practicable, the Corporation shall deliver to the converting
holder a stock certificate for the number of shares of Common Stock
issuable upon the conversion and a stock certificate representing the
number of shares of Convertible Preferred Stock equal to any
unconverted portion of the stock certificate surrendered by the holder
to the Corporation pursuant to this Section 2(F). Except as set forth
in Section 2(D) or 2(E) with respect to the computation of the number
of shares of Common Stock issuable upon exercise of a Conversion
Right, no payment or adjustment will be made for accrued dividends on
any share of Convertible Preferred Stock converted pursuant to a
Conversion Right or for dividends on any Common Stock issued pursuant
to the exercise of a Conversion Right. All accrued and unpaid
dividends on such share shall cease to be payable following conversion
of a share of Convertible Preferred Stock.
Any Conversion Right then exercisable in respect of any shares of
Convertible Preferred Stock called for redemption shall terminate at
the close of business on the business day prior to the date fixed for
redemption, provided that no default by the Corporation in the payment
of the application redemption price (including any accrued and unpaid
dividends) shall have occurred and be continuing.
(G) If a holder of a share of Convertible Preferred Stock
converts such share pursuant to a Conversion Right, the Corporation
shall pay any documentary, stamp or similar issue or transfer tax due
on the issue of shares of Common Stock upon the conversion. However,
such holder shall pay any such tax that is due because the shares are
issued in a name other than that such converting holder's name, and
the Corporation shall not be required to issue or deliver certificates
representing such shares of Common Stock unless or until the party or
parties requesting the issuance thereof shall have paid to the
Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid.
(H) The Corporation covenants that it will, after a Dividend
Default and prior to any Penalty Conversion Date, use its best efforts
to reserve and keep available, free from preemptive rights, out of its
authorized Common Stock, solely for the purpose of issuance upon
conversion of
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shares of Convertible Preferred Stock pursuant to Conversion Rights,
such number of shares of Common Stock as it then reasonably estimates
shall be issuable upon the conversion of all outstanding shares of
Convertible Preferred Stock that may be converted pursuant to
Conversion Rights that may be excisable following the next Penalty
Conversion Date. The Corporation convenants that all shares of Common
Stock that shall be issuable upon the exercise of Conversion Rights
shall be, when issued, duly and validly issued and fully paid and
nonassessable, free of all liens and charges and not subject to any
preemptive rights. For purposes of this Section 2(H), the number of
shares of Common Stock that shall be issuable upon the conversion of
all outstanding shares of Convertible Preferred Stock shall be
computed as if at the time of computation all outstanding shares of
Convertible Preferred Stock were held by a single holder. The issuance
of shares of Common Stock upon conversion of Convertible Preferred
Stock pursuant to exercise of any Conversion Rights is authorized in
all respects.
(I) In any case if any (i) consolidation or merger of the
Corporation with or into another entity (other than a consolidation or
merger in which the Corporation is the surviving entity), (ii) sale or
conveyance of all or substantially all of the assets of the
Corporation, (iii) reclassification or change of the Corporation's
Common Stock issuable upon conversion of shares of Convertible
Preferred Stock pursuant to a Conversion Right (other than a change in
par value, or from par value to no par value, or as a result of a
subdivision or combination, but including any division of the
Corporation's Common Stock into two or more classes or series), (iv)
consolidation or merger of another entity into the Corporation in
which the Corporation is the surviving entity and in which there is a
reclassification or change of the Corporation's Common Stock (other
than a change in par value, or from par value to no par value, or as a
result of a subdivision or combination, but including any division of
the Corporation's Common Stock into two or more classes or series), or
(v) Statutory exchange of securities with another entity (including
any exchange effected in connection with a merger of a third enitity
into the Corporation), in each case while any shares of Convertible
Preferred Stock remain outstanding, there shall be no adjustment of
the Penalty Conversion Price or the Extended Penalty Conversion Price
but the holders of outstanding shares of Convertible Preferred Stock
shall have the right thereafter to convert such shares of Convertible
Preferred Stock pursuant to an exercise of any Conversion Right
pursuant to the terms of Section 2(D) or 2(E), as the case may be,
solely into the kind and amount of shares of stock or other
securities, cash or other property, or any combination thereof,
receivable upon such reclassification, change, statutory exchange,
consolidation, merger, sale or conveyance, as if such shares of
Convertible Preferred Stock had been converted into shares of Common
Stock immediately prior to the effective date of such
reclassification, change, statutory exchange, consolidation, merger,
sale or conveyance (assuming that the holders of such shares of
Convertible Preferred Stock, as holders of Common Stock prior to the
transaction, would not have exercised any rights of election as
holders of Common Stock as to the kind or amount of stock or other
securities, cash or other property receivable upon such
reclassification, statutory exchange, consolidation, merger, sale or
conveyance; provided, that if the kind or amount of stock or other
securities, cash or other property receivable upon such
reclassification, change, statutory exchange, consolidation, merger,
sale, or conveyance is not the same for each non-electing share of
Common Stock, then the kind and amount of stock or other securities,
cash or other property receivable shall be deemed to be the kind and
amount so receivable by a plurality of the non-electing shares).
(J) An adjustment made pursuant to Section 2(I) shall become
effective immediately after the effective date in respect of the
transaction giving rise to such adjustment. If, as a result of an
adjustment made pursuant to Section 2 (I), the holder of any share of
Convertible Preferred Stock thereafter surrendered for conversion
shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other capital stock of the
Corporation, the Board of Directors (whose determination shall be
conclusive) shall determine for accounting purposes the allocation of
the Penalty Conversion Price or Extended Penalty Conversion Price, as
the case may be, between or among shares of such classes of capital
stock or shares of Common Stock and other capital stock.
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(K) If (i) any transaction described in Section 2(I) shall have
occurred such that shares of Convertible Preferred Stock shall then be
convertible, in whole or in part, into a security or securities other
than the Common Stock of the Corporation (any such security being
referred to in this Section 2(K) as an "Other Security"), (ii) a
Dividend Default shall have occurred, (iii) a Penalty Conversion Right
with respect to any of the outstanding shares of Convertible Preferred
Stock shall be exercisable in accordance with the terms of Section
2(D), and (iv) any of the following circumstances shall then exist:
(a) the number of units of an Other Security at the time
authorized, unissued and unreserved for all purposes or held in
the treasury of the Corporation or its successors, as the case
may be, is in sufficient to satisfy the Corporation's or such
successor' s obligations with respect to the conversion of
Convertible Preferred Stock pursuant to any such Penalty
Conversion Right; (b) the issuance or delivery of an Other
Security in satisfaction of any such Penalty Conversion Right
would require registration with or approval of any governmental
authority under law or regulation, and such registration or
approval has not been effected or obtained; (c) the Other
Security to be issued in payment of a dividend on the Convertible
Preferred Stock has not been authorized for listing, upon
official notice of issuance, on any United States national or
regional securities exchange on which such Common Stock is then
listed; or (d) the Other Security is not traded in the
over-the-counter market and is not listed on a United States
national or regional securities exchange,
then the Penalty Conversion Right with respect to the Convertible
Preferred Stock shall not terminate at the end of two business days
following the Penalty Conversion Date but shall remain exercisable, in
the manner set forth in Section 2(F), at any time until and including
the thirtieth calendar day after the day on which none of the
circumstances set forth in (a) or (b) above shall continue to exist.
In the event that a Dividend Default shall have occured and any
of the circumstances set forth in (a) or (b) above shall be in
existence, the Corporation shall promptly mail to each holder of
shares of Convertible Preferred Stock, at such holder's last address
as the same appears on the books of the Corporation, a notice of the
existence of such Dividend Default and such circumstance set forth in
(a) or (b) above, which notice shall describe the terms upon which an
extended Penalty Conversion Right may arise and be exercised pursuant
to this Section 2(K). Upon the cessation of all circumstances giving
rise to such extended Penalty Conversion Right, the Corporation shall
notify each holder in similar manner of the date upon which the
Penalty Conversion Right or the Extended Penalty Conversion Right, as
the case may be, shall terminate. Such notice shall set forth the
terms and manner of exercise of such Right.
(L) The Corporation may, in its sole discretion, make any
appropriate upward adjustment in the number of shares of Common Stock
issuable upon conversion of shares of Convertible Preferred Stock
pursuant to the exercise of a Conversion Right as the Corporation
considers to be advisable in order that any event treated for Federal
income tax purposes as a distribution of stock or stock rights with
respect to the Common Stock will not be taxable to the holders of
Common Stock.
(M) Whenever the Penalty Conversion Right of the Convertible
Preferred Stock is adjusted as provided in Section 2(I) or 2(L), a
notice stating that the Penalty Conversion Right has been adjusted,
setting forth the terms of the Penalty Conversion Right as adjusted,
and containing a brief statement of the facts giving rise to such
adjustment and the manner of computing the same (which certificate
shall be conclusive evidence of the correctness of such adjustment),
shall forthwith be mailed by the Corporation or its successor, as the
case may be, to each holder of shares of Convertible Preferred Stock
at such holder's last address as the same appears on the books of the
Corporation.
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In the event that any time as a result of an adjustment made
pursuant to Section 2(I), the holder of any share of Convertible
Preferred Stock thereafter surrendered for conversion shall become
entitled to receive any shares of the Corporation other than shares of
Common Stock, thereafter the Penalty of Conversion Right with respect
to such other shares so receivable upon conversion of any share of
Convertible Preferred Stock shall be subject to readjustment from time
to time in a manner and on terms as nearly equivalent as practicable
to the provisions contained herein.
In any case, if necessary, appropriate adjustment shall be made in the
application of the provisions set forth herein with respect to the
rights and interests thereafter of the holders of shares of
Convertible Preferred Stock, to the end that the provisions set forth
herein shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to any shares of stock or other
securities or property thereafter deliverable on the conversion of
shares of Convertible Preferred Stock pursuant to exercise of a
Conversion Right.
The above provisions shall similarly apply to successive
consolidations, mergers, reclassifications, changes, statutory
exchanges, sales or conveyances.
(N) In the event that: (i) the Corporation shall take any action
which would require an adjustment in the Penalty Conversion Right of
the Convertible Preferred Stock pursuant to the terms of this Section
2; (ii) there shall be any capital reorganization, or reclassification
or change of the Common Stock (other than a change in the par value of
the Common Stock, or from par value to no par value or as a result of
a subdivision or combination of the outstanding Common Stock, but
including any division of the Corporation's Common Stock into two or
more classes or series), or any consolidation or merger to which the
Corporation is a party or any statutory exchange of securities with
another corporation and for which approval of any stockholders of the
Corporation is required, or any sale or conveyance of all or
substantially all of the assets of the Corporation; or (iii) there
shall be a voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; then the Corporation shall cause to be
mailed to each holder of shares of Convertible Preferred Stock at such
holder's last address as the same appears on the books of the
Corporation, at least 15 days prior to the applicable date hereinafter
specified, a notice stating the data on which such reorganization,
reclassification, change, statutory exchange, consolidation, merger,
sale, conveyance, liquidation, dissolution or winding up is expected
to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for stock or other securities, cash or other
property deliverable upon such reorganization, reclassification,
change statutory exchange, consolidation, merger, sale, conveyance,
liquidation, dissolution or winding up. Failure to give such notice,
or any defect therein, shall not, however, affect the legality or
validity of any action described in clauses (i), (ii) or (iii) of this
Section 2(N).
Section 3. Voting Rights. Except as otherwise expressly provided
herein or as specifically required by law, the holders of shares of
Convertible Preferred Stock shall have no voting rights.
(A) So long as the Convertible Preferred Stock is outstanding,
the Corporation shall not, without the affirmative vote of the holders
of at least a majority of all outstanding shares of Convertible
Preferred Stock, voting as a class, (i) amend, alter or repeal any
provisions of the Corporation's Articles of Incorporation, as amended,
or By-laws which would materially adversely affect the Rights and
Preferences of the Convertible Preferred Stock, provided that an
amendment that would authorize or create or increase the amount of any
stock ranking junior to the Convertible Preferred Stock as to dividend
and liquidation rights will be deemed not to adversely affect such
Rights and Preferences, or (ii) authorize or create, or increase the
authorized amount of, any capital stock of the Corporation of any
class, or any security convertible into such capital stock, ranking
prior to or on a parity with the Convertible Preferred Stock as to
either dividend or liquidation rights. Notwithstanding the foregoing,
if the voting rights set forth in this Section 3(A) are exercisable as
to a particular matter by more than one series of the Corporation's
preferred stock, the affirmative
8
vote on such matter will be of the holders of at least a majority of
the shares of all such series voting as a single class without regard
to series, and the separate voting rights of the holders of
Convertible Preferred Stock as set forth in this Section 3(A) shall
not apply.
(B) (i) Whenever and as often as two or more consecutive
semi-annual dividends payable on the Convertible Preferred Stock shall
be past due (a "Default"), the holders of the Convertible Preferred
Stock, voting as a class, shall have the exclusive right, as set forth
below, to vote for and to elect one director of the Corporation. The
right of the holders of the Convertible Preferred Stock to elect such
director, however, shall cease when all arrearage in the payment of
dividends on the Convertible Preferred Stock shall have been cured
(either through payment or through being declared and set aside for
payment) or no such Convertible Preferred Stock is outstanding,
whichever first occurs.
(ii) If, at any time, a Default shall occur, then (i) the
number of directors of the Corporation shall be increase by one,
effective as of the time of election of such directors as hereinafter
provided, and (ii) the holders of Convertible Preferred Stock, voting
as a single class, shall be entitled to elect one director to fill the
vacancy caused by so increasing the number of directors (the class or
classes of directors to which such director is to be assigned to be
determined by the board of Directors). The right of the holders of the
Convertible Preferred Stock so to elect such director may be exercised
at any time before all arrearage in the payment of dividends on the
Convertible Preferred Stock are cured, as set forth in (i) above.
Effective as of such cure, (i) the holders of the Convertible
Preferred Stock shall no longer have the right so to elect any
directors, subject to revesting in the event of each and every
subsequent Default, (ii) the term of office of the director then in
office elected by such holders voting as a class shall forthwith
terminate and (iii) the number of directors of the Corporation shall
be reduced by one, effective as of the date of such termination.
The foregoing right of the holders of the Convertible Preferred
Stock with respect to the election of a director may be exercised at
any annual meeting of shareholders or, within the limitations
hereinafter provided, at a special meeting of shareholders held for
such purpose. If a Default shall occur more than one ninety (90) days
preceding the date established for the next annual meeting of
shareholders, the Corporation shall, within twenty (20) days after
delivery to the Corporation at its principal office of a written
request for a special meeting signed by the holders of at least an
aggregate of twenty-five percent (25%) of the outstanding shares of
Convertible Preferred Stock, call a special meeting of the holders of
the Convertible Preferred Stock to be held within sixty (60) days
after the delivery of such request, for the purpose of electing an
additional director to serve until the next annual meeting of
shareholders of the Corporation and until such director's successor
shall have been elected and qualified or until such director's earlier
death or resignation, or until such earlier date as provided herein,
whichever occurs first. Notice of such meeting shall be mailed to each
holder of Convertible Preferred Stock as provided by Pennsylvania law
and the Corporation's By-laws.
The Board of Directors may fix a record date for the
determination of holders of Convertible Preferred Stock entitled to
vote for the election of a director pursuant to the terms of this
Section 3 at an annual or special meeting of shareholders, as the case
may be, which record date shall not be more than fifty (50) days prior
to the date of the meeting.
The holders of at least a majority of the outstanding shares of
Convertible Preferred Stock voting as a class shall have the right to
remove without cause at any time and replace any director such holders
have elected pursuant to this Section 3. If the office of any director
elected by the holders of the Convertible Preferred Stock becomes
vacant by reason of death, resignation, retirement, disqualification,
removal from office, or otherwise, the vacancy may be filled by vote
of the holders of the Convertible Preferred Stock in the manner
provided above.
9
(C) On any matter as to which the holders of Convertible
Preferred Stock shall be entitled to vote as provided above, they
shall be entitled to one vote per share. The holders of Convertible
Preferred Stock shall not have the right of cumulative voting in any
election of directors.
(D) The holders of Convertible Preferred Stock shall not be
entitled to vote as provided above on any matter if, at or prior to
the time when the act with respect to which such vote would otherwise
be required will be effected, all outstanding shares of Convertible
Preferred Stock have been redeemed, or have been called for redemption
if sufficient funds have been deposited with a bank or trust company
to effect such redemption as provided in Section 8.
(E) Nothing herein contained shall require a vote of the holders
of shares of Convertible Preferred Stock in connection with (i) the
authorization, designation, increase or issuance of any shares of any
class or series of capital stock which ranks junior to the Convertible
Preferred Stock as to dividend and liquidation rights, (ii) the
authorization, issuance or increase in the amount of any bonds,
mortgages, debentures or other obligations of the Corporation, or
(iii) any merger or consolidation involving the Corporation or any
reclassification of any stock ranking junior to the Convertible
Preferred Stock as to dividend and liquidation rights.
Section 4. Certain Restrictions.
(A) Whenever any semi-annual dividend payable on the Convertible
Preferred Stock as provided in Section 2 is in arrears, thereafter and
until (i) all accumulated and unpaid dividends, whether or not
declared, on shares of Convertible Preferred Stock outstanding shall
have been paid in full or (ii) all shares of Convertible Preferred
Stock shall have been converted into Common Stock as provided in
Section 2 or Section 9, the Corporation shall not
(i) declare or pay dividends or make any other distributions on
any shares of stock ranking junior to the Convertible Preferred
Stock as to dividends;
(ii) declare or pay dividends or make any other distributions on
any shares of stock ranking on a party with the Convertible
Preferred Stock as to dividends, except (a) dividends or other
distributions paid ratably on the Convertible Preferred Stock and
all such parity stock so that the amount of dividends or other
distributions declared per share on each such series or class of
stock bear to each other the same ratio that the accumulated but
unpaid dividends per share on the shares of each such series or
class of stock bear to each other, or (b) dividends or other
distributions paid in Common Stock (or other stock of the
Corporation ranking junior to the Convertible Preferred Stock as
to dividends and upon liquidation, dissolution or winding up) on
the Convertible Preferred Stock and such other stock of the
Corporation as shall be entitled to receive dividends or
distributions in Common Stock (or such other junior stock), such
that all accumulated and unpaid dividends on all such stock shall
be paid in full;
(iii) redeem or purchase or otherwise acquire for consideration
(including pursuant to sinking fund requirements) shares of any
stock ranking junior to the Convertible Preferred Stock as to
dividends, except that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior stock by
the conversion of such shares into, or the exchange of such
shares for, shares of any stock of the Corporation ranking junior
to the Convertible Preferred Stock as to dividends and upon
dissolution, liquidation or winding up;
(iv) redeem pursuant to a sinking fund or otherwise any stock for
the Corporation ranking on a parity with the Convertible
Preferred Stock as to dividends, except (a) by means of a
redemption pursuant to which all outstanding shares of
Convertible Preferred Stock and all stock of the Corporation
ranking on a parity with the Convertible Preferred Stock as to
dividends are redeemed or pursuant to which a pro rata redemption
is made
10
from all holders of the Convertible Preferred Stock and all stock
of the Corporation ranking on a parity with the Convertible
Preferred Stock as to dividends, the amount allocable to each
series of such stock being determined on the basis of the
aggregate liquidation preference of the outstanding shares of
each series and the shares of each series being redeemed only a
pro-rata basis, or (b) by conversion of such parity stock into,
or exchange of such parity stock for, stock of the Corporation
ranking junior to the Convertible Preferred Stock as to dividends
and upon liquidation, dissolution or winding up; or
(v) purchase or otherwise acquire for any consideration any stock
of the Corporation ranking on a parity with the Convertible
Preferred Stock as to dividends, except (a) pursuant to an
acquisition made in accordance with the terms of one or more
offers to purchase all of the outstanding shares of Convertible
Preferred Stock and all stock of the Corporation ranking on a
parity with the Convertible Preferred Stock as to dividends
(which offers shall describe such proposed acquisition of all
such parity stock), which offers shall each have been accepted by
the holders of at least 50% of the shares of each series or class
of stock receiving such offer outstanding at the commencement of
the first of such purchase offers, or (b) by conversion of such
parity stock into, or exchange of such parity stock for, stock of
the Corporation ranking junior to the Convertible Preferred Stock
as to dividends and upon liquidation, dissolution or winding up.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
Section 4(A), purchase or otherwise acquire such shares at such time
and in such manner.
Section 5. Reacquired Shares. Any shares of Convertible Preferred
Stock redeemed or acquired by conversion or otherwise by the
Corporation in any manner whatsoever shall have the status of
authorized but unissued shares of preferred stock and may be reissued
as part of a new series of preferred stock created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding up. Upon any
voluntary or involuntary liquidation, dissolution, or winding up of
the Corporation, no distribution shall be made
(A) to the holders of shares of stock ranking junior to the
Convertible Preferred Stock upon liquidation, dissolution or winding
up unless, prior thereto, the holders of shares of Convertible
Preferred Stock shall have received $25.00 per share plus an amount
equal to accrued and unpaid dividends and distributions thereon to the
date of such payment, whether or not declared, or
(B) to the holders of stock ranking on a parity with the
Convertible Preferred Stock upon liquidation, dissolution or winding
up, except distributions made ratably on the Convertible Preferred
Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
After payment in full of the liquidation preference of the
Convertible Preferred Stock as aforesaid, the Convertible Preferred
Stock shall not be entitled to receive any additional cash, property
or other assets of the Corporation upon the liquidation, dissolution
or winding up of the Corporation. In the event of a liquidation
preference payment amounting in the aggregate to less than $25.00 per
share plus accrued dividends, the Corporation in its discretion may
require the surrender of certificates of the Convertible Preferred
Stock and issue a replacement certificate or certificates, or it may
require the certificates evidencing the shares in respect of which
such payments are to be made to be presented to the Corporation, or
its agent, for notation thereon of amounts of the liquidation
preference payments made in respect of such shares. In the event a
certificate for Convertible Preferred Stock on which payment of one or
more partial liquidation preference payments has been made is
presented for exchange or transfer, the certificate issued
11
upon such exchange or transfer shall bear an appropriate notation as
to the aggregate amount of liquidation preference payments theretofore
made in respect thereof.
Section 7. Consolidation, Merger and Sale of Assets.
(A) A consolidation or merger of the Corporation with or into
another corporation, the merger of any other corporation into the
Corporation, a voluntary sale, conveyance, lease, exchange or transfer
of all or substantially all of the assets of the Corporation in
consideration of the issuance of equity securities of another
corporation or otherwise, or any purchase or redemption of some or all
of the shares of any class or series of stock of the Corporation,
shall not be deemed to be a liquidation, dissolution or winding up of
the Corporation for any purpose in connection with or related to the
Convertible Preferred Stock (unless in connection therewith the
liquidation, dissolution or winding up of the Corporation is
specifically approved).
(B) The Corporation shall not be consolidated or merge with, or
sell, transfer or lease all or substantially all of its assets to
another corporation, person or entity unless the successor entity
assumes in writing all of the obligations of the Corporation with
respect to the Convertible Preferred Stock.
Section 8. Optional Redemption.
(A) The Convertible Preferred Stock may not be redeemed by the
Corporation prior to June 1, 1990 unless the Closing Sale Price (as
defined in Section 2(C), hereof) of the Common Stock shall have
equaled or exceeded 150% of the then effective Conversion Price (as
defined in Section 9 hereof) for at least 20 trading days within a
period of 30 consecutive trading days ending no more than five days
prior to giving of notice of redemption. In such event prior to June
1, 1990, and in any event on and after June 1, 1990, the Corporation
may, at its sole option and election, redeem the Convertible Preferred
Stock, in whole or in part, out of funds legally available therefor,
at any time and from time to time, during the following periods and at
the following prices per share:
Period Redemption Price
------ ----------------
June 1, 1987-May 31, 1988 $27.50
June 1, 1988-May 31, 1989 27.25
June 1, 1989-May 31, 1990 27.00
June 1, 1990-May 31, 1991 26.75
June 1, 1991-May 31, 1992 26.50
June 1, 1992-May 31, 1993 26.25
June 1, 1993-May 31, 1994 26.00
June 1, 1994-May 31, 1995 25.75
June 1, 1995-May 31, 1996 25.50
June 1, 1996-May 31, 1997 25.25
June 1, 1997 and thereafter 25.00
in each case plus all dividends (whether or not declared) accrued and unpaid to
the date of redemption.
No sinking funding shall be established for the Convertible Preferred
Stock.
(B) If less than all of the Convertible Preferred Stock at the
time outstanding is to be redeemed, the shares so to be redeemed shall
be selected by lot, pro rata or by substantially equivalent method.
(C) Notice of any redemption of the Convertible Preferred Stock
shall be mailed, by means of first class mail, postage pre-paid, at
least thirty (30), but not more than sixty (60), calendar days prior
to the date fixed for redemption to each holder of Convertible
Preferred Stock to be redeemed, at such holder's address as it appears
on the books of the Corporation. In order to
12
facilitate the redemption of the Convertible Preferred Stock, the
Board of Directors may fix a record date for the determination of
holders of Convertible Preferred Stock to be redeemed, which shall not
be more than fifty (50) days prior to the date fixed for such
redemption.
Each such notice shall specify (i) the redemption date, (ii) the
redemption price, (iii) the place for payment and for delivering the
stock certificate(s) and transfer instrument(s) in order to collect
the redemption price, (iv) the shares of Convertible Preferred Stock
to be redeemed and (v) the then effective Conversion Price (as defined
below) and that the right of holders of shares of Convertible
Preferred Stock being redeemed to convert such shares of Common Stock
shall terminate at the close of business on the business day prior to
the redemption date (provided that no default by the Corporation in
the payment of the applicable redemption price shall have occurred and
be continuing).
Any notice mailed as provided herein shall be conclusively deemed
to have been duly given whether or not such notice is in fact
received.
The holder of any shares of Convertible Preferred Stock redeemed
upon any exercise of the Corporation's redemption right shall not be
entitled to receive payment of the redemption price for such shares
until such holder shall cause to be delivered to the place specified
in the notice given with respect to such redemption (i) the
certificates representing such shares of Convertible Preferred Stock
and (ii) appropriate endorsements and transfer documents sufficient to
transfer such shares of Convertible Preferred Stock to the Corporation
free of any adverse interest. No interest shall accrue on the
redemption price of any share of Convertible Preferred Stock after its
redemption date.
(D) On the redemption date specified in the notice given pursuant
to Section 8(C), the Corporation shall, and at any time after such
notice shall have been mailed and before such redemption date the
Corporation may, deposit for the pro rata benefit of the holders of
the shares of Convertible Preferred Stock so called for redemption the
funds necessary for such redemption with a bank or trust company
having a capital and surplus of at least $50,000,000. Any monies so
deposited by the Corporation and unclaimed at the end of two years
from the date designated for such redemption shall revert to the
general funds of the Corporation. After such reversion, such bank or
trust company shall, upon demand, pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company shall be
relieved of all responsibility in respect thereof to such holder and
such holder shall look only to the Corporation for the payment of the
redemption price. In the event that monies are deposited pursuant to
this Section 8(D) in respect of shares of Convertible Preferred Stock
that are converted in accordance with the provisions of Section 2 or
9, such monies shall, upon such conversion, revert to the general
funds of the Corporation and, upon demand, such bank or trust company
shall pay over to the Corporation such monies and shall thereupon be
relieved of all responsibility to the holders of such shares in
respect thereof. Any interest accrued on funds so deposited pursuant
to this Section 8(D) shall be paid from time to time to the
Corporation for its own account.
(E) Upon deposit of funds pursuant to Section 8(D) in respect of
shares of Convertible Preferred Stock called for redemption,
notwithstanding that any certificates for such shares shall not have
been surrendered for cancellation, the shares represented thereby
shall no longer be deemed outstanding, the rights to receive dividends
thereon shall cease to accrue from and after the date of redemption
designated in the notice of redemption and all rights of the holders
of the shares of Convertible Preferred Stock called for redemption
shall cease and terminate, excepting only the right to receive the
redemption price therefor (including any accrued and unpaid dividends
to the date fixed for redemption), without interest.
(F) Subject to Section 4 hereof, the Corporation shall have the
right to purchase shares of Convertible Preferred Stock in the public
market at such prices as may from time to time be available in the
public market for such shares and shall have the right at any time to
acquire any
13
shares of Convertible Preferred Stock from the owner of such shares on
such terms as may be agreeable to such owner. Shares of Convertible
Preferred Stock may be acquired for the Corporation from any
shareholder pursuant to this paragraph without offering any other
shareholder an equal opportunity to sell his stock to the Corporation,
and no purchase by the Corporation from any shareholder pursuant to
this paragraph shall be deemed to create any right on the part of any
shareholder to sell any shares of Convertible Preferred Stock (or any
other stock) to the Corporation.
(G) Notwithstanding the foregoing provisions of this Section 8,
and subject to the provisions of Section 4 hereof, whenever any
dividend payable on the Convertible Preferred Stock as provided in
Section 2 is in arrears, thereafter and until (i) all accumulated and
unpaid dividends and distributions, whether or not declared, on shares
of Convertible Preferred Stock outstanding shall have been paid in
full or (ii) all shares of Convertible Preferred Stock shall have been
converted into Common Stock as provided in Section 2 or Section 9, the
Corporation shall not (a) redeem any shares of Convertible Preferred
Stock, except (1) by means of a redemption pursuant to which all
outstanding shares of Convertible Preferred Stock are simultaneously
redeemed or the outstanding shares of Convertible Preferred Stock are
redeemed on a pro rata basis, or (2) by conversion of shares of
Convertible Preferred Stock into, or exchange of such shares for,
Common Stock or any other stock of the Corporation ranking junior to
the Convertible Preferred Stock as to dividends and upon liquidation,
dissolution and winding up; or (b) purchase or otherwise acquire any
shares of Convertible Preferred Stock, except (1) pursuant to a
purchase or exchange offer made on the same terms to all holders of
Convertible Preferred Stock, or (2) by conversion of shares of
Convertible Preferred Stock into, or by an exchange of such shares
for, Common Stock or any other stock of the Corporation ranking junior
to the Convertible Preferred Stock as to dividends and upon
liquidation, dissolution and winding up.
Section 9. Conversion Option.
(A) The holder of any share of Convertible Preferred Stock shall
have the right, at such holder's option (but if such share is called
for redemption, then in respect of such share only to and including
but not after the close of business on the business day immediately
prior to the date fixed for such redemption, provided that no default
by the Corporation in the payment of the applicable redemption price
(including any accrued and unpaid dividends) shall have occurred and
be continuing) to convert such share into that number of fully paid
and non-assessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share) obtained by dividing $25
by the Conversion Price then in effect. The Conversion Price shall
initially be $12.00 per share and shall be subject to adjustment as
set forth below.
(B) In order to exercise the conversion privilege, the holder of
shares of Convertible Preferred Stock shall surrender the
certificate(s) evidencing such share(s), accompanied by instruments of
transfer satisfactory to the Corporation and sufficient to transfer
the Convertible Preferred Stock being converted to the Corporation
free of any adverse interest, at any of the offices or agencies
maintained for such purpose by the Corporation ("Conversion Agent")
and shall be complete and sign the Notice of Election to Convert on
the reverse side of the certificate(s). The holder shall also
contemporaneously provide to the Corporation a written notice stating
the name or names, together with address or addresses, in which the
certificate or certificates for shares of Common Stock which shall be
issuable on such conversion shall be issued. As promptly as
practicable after the surrender of such share(s) of Convertible
Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver, at the offices of such Conversion Agent, to such holder, or
on his written order, a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of such
share(s) in accordance with the provisions hereof and any fractional
interest in respect of a share of Common Stock arising upon such
conversion shall be settled as provided in Section 10 below. A new
certificate or certificates will be issued representing the remaining
shares of Convertible Preferred Stock in any case in which fewer than
all of the
14
shares of Convertible Preferred Stock represented by a certificate are
converted. Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which shares
of Convertible Preferred Stock shall have been so surrendered and such
notice received by the Corporation as aforesaid, and the person or
persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the Common
Stock represented thereby at such time, unless the stock transfer
books of the Corporation shall be closed on the date on which shares
of Convertible Preferred Stock are so surrendered fro conversion, in
which event such conversion shall be deemed to have been effected
immediately prior to the close of business on the next succeeding day
on which such stock transfer books are open, and such person or
persons shall be deemed to have become such holder or holders of
record of the Common Stock at the close of business on such later day.
In either circumstance, such conversion shall be at the Conversion
Price in effect on the date upon which such share shall have been
surrendered and such notice received by the Corporation. No payment or
adjustment shall be made on conversion for any dividends accrued on
shares of Convertible Preferred Stock surrendered for conversion of
for any dividends on the Common Stock delivered on conversion.
Effective as of any such conversion, the Corporation shall be excused
from paying any dividends on the shares of Convertible Preferred Stock
converted, including any dividends past due at the time of conversion;
provided that if a share of Convertible Preferred Stock is surrendered
for conversion after the record date for a declared dividend payment,
such dividend shall nevertheless be paid on such share in the normal
course.
(C) If, in lieu of any fractional interest in a share of Common
Stock which would otherwise be deliverable upon the conversion of any
share or shares of Convertible Preferred Stock, the Corporation,
pursuant to the terms of Section 10 hereof, shall deliver cash, the
fair market value of a share of Common Stock shall be deemed to be
equal to the Closing Sale Price (as defined above) of the Common Stock
on the day of conversion or, if such day is not a trading day, on the
trading day immediately prior to the day of conversion. If more than
one certificate representing shares of Convertible Preferred Stock
shall be surrendered for conversion at one time by the same holder,
the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Convertible
Preferred Stock represented by such certificates, or the specified
portions thereof to be converted, so surrendered.
(D) Notwithstanding the other provisions of this Section 9, the
Conversion Price shall be adjusted on December 15, 1988 to an amount
equal to the lesser of (i) the Conversion Price otherwise then in
effect and (ii) 120% of the average of the daily Closing Sales Prices
(as defined above) of the Common Stock for the 60 consecutive trading
days ending December 8, 1988 and provided further, that any such
adjustment of the Conversion Price shall be made only with respect to
shares of Convertible Preferred Stock which shall not have been
surrendered for conversion prior to December 15, 1988. When the
Conversion Price is adjusted as provided in this Section 9, the
Corporation shall promptly file with any Conversion Agent, a
certificate signed by the President, and by the Treasurer, or an
Assistant Treasurer, and the Secretary or an Assistant Secretary, of
the Corporation setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment and the manner of computing the same. Any
determination as to whether an adjustment is required, or as to the
amount or nature thereof, shall be binding upon the holders of the
Convertible Preferred Stock and the Corporation if made in good faith
by the Board of Directors to the Corporation. Upon the filing of the
certificate required by this Section 9(D), the Corporation shall
promptly make a summary of the adjustment generally available to the
holders of the Convertible Preferred Stock, by such means as is
reasonable determined by the Board of Directors in its sole
discretion. In the event that at any time prior to or on December 15,
1988 as a result of an adjustment made pursuant to subsection (a)
below, the holder of any share of Convertible Preferred Stock
thereafter surrendered for conversion shall become entitled to receive
any shares of the Corporation other than shares of Common Stock,
thereafter the Conversion Price of such other shares so receivable
upon conversion of any share of Convertible Preferred Stock shall be
subject to readjustment on December 15, 1988 in a manner and on terms
15
as nearly equivalent as practicable to the provisions with respect to
Common Stock contained herein.
The Conversion Price shall be adjusted from time to time as follows:
(a) In case the Corporation shall hereafter (i) pay a dividend or make
a distribution on its Common Stock in shares of Common Stock or in
shares of capital stock other than Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares,
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its Common Stock
any shares of capital stock of the Corporation, the Conversion Price
in effect immediately prior to such action shall be adjusted so that
the holder of any share thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock or other
capital stock of the Corporation which he would have owned immediately
following such action had such shares been converted immediately prior
thereto. An adjustment made pursuant to this subsection (a) shall
become retroactively effective as of immediately after the record date
in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made
pursuant to this subsection (a), the holder of any share of
Convertible Preferred Stock thereafter surrendered for conversion
shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other capital stock of the
Corporation, the Board of Directors (whose determination shall be
conclusive and shall be described in a statement filed with any
Conversion Agent) shall determine for accounting purposes the
allocation of the adjusted Conversion Price between or among shares of
such classes of capital stock or shares of Common Stock and other
capital stock.
(b) In case the Corporation shall hereafter issue rights or warrants
to holders of its outstanding shares of Common Stock generally
entitling them (for a period expiring within 45 days after the record
date mentioned below) to subscribe for or purchase shares of Common
Stock at a price per share less than the current market price per
share (determined as provided below) of the Common Stock on the record
date mentioned below, the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of issuance
of such rights or warrants by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of shares which
the aggregate offering price of the total number of shares of Common
Stock offered pursuant to such rights or warrants would purchase at
such current market price, and of which the denominator shall be the
number of shares of Common Stock outstanding on the date of issuance
of such rights or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase pursuant to such
rights or warrants. Such adjustment shall become retroactively
effective as of immediately after the record date for the
determination of stockholders entitled to receive such rights or
warrants.
(c) In case the Corporation shall hereafter distribute to holders of
its outstanding Common Stock generally evidences of indebtedness or
assets (excluding any cash dividend or cash distributions, dividends
or distributions payable in stock for which adjustment is made
pursuant to subsection (a) above) or rights or warrants to subscribe
for or purchase securities of the Corporation (excluding those
referred to in subsection (b) above), then in each such case the
Conversion Price of the shares of Common Stock shall be adjusted so
that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such
distribution by a fraction of which the numerator shall be the current
market price per share (determined as provided below) of the Common
Stock on the record date mentioned below less the then fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive and evidenced by a resolution of the Board of
Directors) of the portion of the evidences of indebtedness or assets
so distributed to the holder of one share of Common Stock or of such
subscription rights or warrants applicable to one share of Common
Stock, and of which the denominator shall be such current market price
per share of Common Stock. Such adjustment shall become retroactively
effective as
16
of immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(d) For the purpose of any computation under subsections (b) and (c)
above, the current market price per share of Common Stock on any date
shall be deemed to be the average of the daily Closing Sales Price (as
defined above) of the Common Stock for the 30 consecutive trading days
commencing 45 trading days before the day in question.
(e) In any case which shall require that an adjustment be made
immediately following a particular date, the Corporation may elect to
defer (but only five business days following the filing by the
Corporation with any Conversion Agent of its certificate referred to
above) issuing to the holder of any share of Convertible Preferred
Stock converted after such date the shares of Common Stock issuable
upon such conversion over and above the shares of Common Stock
issuable upon such conversion on the basis of the Conversion Price
prior to adjustment.
(f) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1%
of such price; provided, however, that any adjustments which by reason
of this subsection (f) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations shall be made to the nearest cent or the nearest 1/100th
of a share, as the case may be.
(g) In the event that at any time as a result of an adjustment made
pursuant to subsection (a) above, the holder of any share of
Convertible Preferred Stock thereafter surrendered for conversion
shall become entitled to receive any shares of the Corporation other
than shares of Common Stock, thereafter the Conversion Price of such
other shares so receivable upon conversion of any share of Convertible
Preferred Stock shall be subject to readjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Stock contained herein.
In the event that: (i) the Corporation shall take any action
which would require an adjustment in the Conversion Price pursuant
hereto; (ii) there shall be any capital reorganization, or
reclassification or change of the Common Stock (other than a change in
the par value of the Common Stock, or from par value to no par value,
or as a result of a subdivision or combination of the outstanding
Common Stock, but including any division of the Corporation's Common
Stock into two or more classes or series ), or any consolidation or
merger to which the Corporation is a party or any statutory exchange
of securities with another corporation and for which approval of any
shareholders of the Corporation is required, or any sale or conveyance
of all or substantially all of the assets of the Corporation; or (iii)
there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; then the Corporation shall cause to be
mailed to all holders of shares of the Convertible Preferred Stock at
each such holder's last address as the same appears on the books of
the Corporation, at least 15 days prior to the applicable date
hereinafter specified, a notice stating the date on which such
reorganization, reclassification, change, statutory exchange,
consolidation, merger, sale, conveyance, dissolution, liquidation or
winding up is expected to become effective, and the date as of which
it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or
other securities, cash or other property deliverable upon such
reorganization, reclassification, change, statutory exchange,
consolidation, merger, sale, conveyance, dissolution, liquidation or
winding up. Failure to give such notice, or any defect therein, shall
not, however, affect the legality or validity of any action described
in clauses (i), (ii), (iii) of this paragraph.
The Corporation may, at any time and from time to time, by
resolution of the Board of Directors, reduce the Conversion Price,
provided that such reduction is for a minimum period of 20 days and is
irrevocable during such period, and that the Company notifies (in the
manner herein set forth) holders of Convertible Preferred Stock of
such reduction at least 15 days prior to the date on which the reduced
conversion price takes effect. The Corporation shall give notice of
any such
17
reduction to any Conversion Agent and, by mail, to each holder of
shares of Convertible Preferred Stock at their last address as the
same appears on the books of the Corporation.
(E) If a holder of a share of Convertible Preferred Stock
converts such share, the Corporation shall pay any documentary, stamp
or similar issue or transfer tax due on the issue of shares of Common
Stock upon the conversion. However, such holder shall pay any such tax
that is due because the shares are issued in a name other than such
converting holder's name, and neither the Corporation nor any
Conversion Agent shall be required to issue or deliver certificates
representing such shares of Common Stock unless or until the party or
parties requesting the issuance thereof shall have paid to the
Corporation or the Conversion Agent the amount of such tax or shall
have established to the satisfaction of the Corporation that such tax
has been paid.
(F) The Corporation covenants that it will reserve and keep
available, free from preemptive rights, out of its authorized Common
Stock, solely for the purpose of issuance upon conversion of shares of
Convertible Preferred Stock as provided in this Section 9, the full
number of shares of Common Stock issuable upon the conversion of all
outstanding shares of Convertible Preferred Stock not theretofore
converted. The Corporation covenants that all shares of Common Stock
that shall be so issuable shall be, when issued, duly and validly
issued and fully paid and nonassessable, free of all liens and charges
and not subject to any preemptive rights. For purposes of this Section
9 (F), the number of shares of Common Stock that shall be issuable
upon conversion shall be computed as if at the time of computation all
outstanding shares of Convertible Preferred Stock were held by a
single holder. The issuance of shares of Common Stock upon conversion
of Convertible Preferred Stock as herein provided is authorized in all
respects.
(G) In case of any (i) consolidation or merger of the Corporation
with or into another entity (other than a consolidation or merger in
which the Corporation is the surviving entity), (ii) sale or
conveyance of all or substantially all of the assets of the
Corporation, (iii) reclassification or change of the Corporation's
Common Stock issuable upon conversion of shares of Convertible
Preferred Stock (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combination, but
including any division of the Corporation's Common Stock into two or
more classes or series), (iv) consolidation or merger of another
entity into the Corporation in which the Corporation is the surviving
entity and in which there is a reclassification or change of the
Corporation's Common Stock (other than a change in par value, or from
par value to no par value, or as a result of a subdivision or
combination, but including any division of the Corporation's Common
Stock into two or more classes or series), or (v) statutory exchange
of securities with another entity (including any exchange effected in
connection with a merger of a third entity into the Corporation), in
each case while any shares of Convertible Preferred Stock remain
outstanding, there shall be no adjustments of the Conversion Price but
holders of outstanding shares of Convertible Preferred Stock shall
have the right thereafter to convert such shares of Convertible
Preferred Stock pursuant to Section 9(A) solely into the kind and
amount of shares of stock or other securities, cash or other property,
or any combination thereof receivable upon such reclassification,
change, statutory exchange, consolidation, merger, sale or conveyance,
as if such shares of Convertible Preferred Stock had been converted
into shares of Common Stock immediately prior to the effective date of
such reclassification, change, statutory exchange, consolidation,
merger, sale or conveyance (assuming that the holders of such shares
of Convertible Preferred Stock, as holders of Common Stock prior to
such transaction, would not have exercised any rights of election as
holders of Common Stock as to the kind or amount of stock or other
securities, cash or other property receivable upon such
reclassification, change, statutory exchange, consolidation, merger,
sale or conveyance; provided, that if the kind or amount of stock or
other securities, cash or other property receivable upon such
reclassification, change, statutory exchange, consolidation, merger,
sale or conveyance is not the same for each non-electing share of
Common Stock, then the kind and amount of stock or other securities,
cash or other property receivable shall be deemed to be the kind and
amount so receivable by a plurality of the non-electing shares).
18
(H) An adjustment made pursuant to Section 9(G) shall become
effective immediately after the effective date in respect of the
transaction giving rise to such adjustment. If, as a result of an
adjustment made pursuant to Section 9(G), the holder of any share of
Convertible Preferred Stock thereafter surrendered for conversion
shall become entitled to receive shares of two or more classes of
capital stock or shares of Common Stock and other Capital Stock of the
Corporation, the Board of Directors (whose determination shall be
conclusive) shall determine for accounting purposes the allocation of
the Conversion Price between or among shares of such classes of
capital stock or shares of Common Stock and other capital stock.
(I) The Corporation may, in its sole discretion, make any
appropriate upward adjustment in the number of shares of Common Stock
issuable upon conversion of shares of Convertible Preferred Stock
pursuant to this Section 9 as the Corporation considers to be
advisable in order that any event treated for Federal income tax
purposes as a distribution of stock or stock rights with respect to
the Common Stock will not be taxable to the holders of Common Stock.
(J) In the event that at any time as a result of an adjustment
made pursuant to Section 9(G), the holder of any share of Convertible
Preferred Stock thereafter surrendered for conversion shall become
entitled to receive any securities of the Corporation other than
shares of Common Stock, thereafter the conversion rights with respect
to such other securities shall be subject to readjustment from time to
time in a manner and on terms as nearly equivalent as practicable to
the provisions contained herein.
In any case, if necessary, appropriate adjustment shall be made
in the application of the provisions set forth herein with respect to
the rights and the interests thereafter of the holders of shares of
Convertible Preferred Stock, to the end that the provisions set forth
herein shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to any shares of stock or other
securities or property thereafter deliverable on the conversion of
shares of Convertible Preferred Stock pursuant to this Section 9.
The above provisions shall similarly apply to successive
consolidations, mergers, reclassifications, changes, statutory
exchanges, sales or conveyances.
(K) No Conversion Agent shall at any time be under any duty or
responsibility to any holder of Convertible Preferred Stock to verify
the Conversion Price or the method employed in determining the same.
No Conversion Agent shall be accountable with respect to the validity
or value (or the kind or amount) of any Common Stock or of any stock
or other securities, cash or other property which may at any time be
issued and delivered upon the conversion of any share of Convertible
Preferred Stock , or make any representation with respect thereto. No
Conversion Agent shall be responsible for any failure of the
Corporation to make any cash payment or to issue, transfer or deliver
any Common Stock or stock certificates or other securities or property
upon the surrender of any share of Convertible Preferred Stock for the
purpose of conversion or to comply with any of the covenants of the
Corporation contained in this Section 9.
Section 10. Fractional Shares. In the event the holder of
Convertible Preferred Stock shall be entitled to receive a fractional
interest in a share of Convertible Preferred Stock or a fractional
interest in a share of Common Stock, except as otherwise provided
herein, the Corporation shall either, in the sole discretion of the
Board of Directors, (i) round such fractional interest up to the next
whole share of Convertible Preferred Stock or Common Stock, as the
case may be, (ii) issue a fractional share of such stock, (iii)
deliver cash in the amount of the fair market value of such fractional
interest as herein provided, or (iv) issue scrip representing a
fractional share of such stock entitling the holder to receive a full
share of such stock upon the surrender of such scrip aggregating a
full share of such stock.
Section 11. Elimination of Preemptive Rights. No holder of shares
of Convertible Preferred Stock shall be entitled as such, as a matter
of right, to subscribe for or purchase any part of any new
19
or additional issues of securities of any class of the Corporation,
whether now or hereafter authorized.
Section 12. Cash Dividend Election.
(A) Notwithstanding an election by the Corporation to pay a
dividend in whole or in part in Common Stock, holders of Convertible
Preferred Stock may elect to receive the dividend in cash in the
following manner. If the Corporation declares a dividend payable in
whole or in part in Common Stock, it shall provide written notice
thereof to the holders of record entitled to the dividend. Such notice
shall be accompanied by a form which must be completed, executed and
returned to the Corporation by any holder of record electing to
receive the dividend in cash. If and to the extent that it has funds
legally available therefor, the Corporation shall pay the dividend in
cash to any holder of record whose election form is received by the
Corporation by the close of business on the 15th business day after
the date of the Corporation's notice. If and to the extent that the
Corporation does not have funds legally available for the payment of
the cash dividends, the dividend shall be payable in Common Stock even
to those holders of record who elect to receive cash.
(B) In addition to the foregoing provisions hereof, if any
semi-annual dividend payable on the Convertible Preferred Stock is in
arrears, thereafter and until (i) all accumulated and unpaid
dividends, whether or not declared, on shares of Convertible Preferred
Stock outstanding shall have been paid in full or (ii) all shares of
Convertible Preferred Stock with respect to which dividends are in
arrears shall have been converted into Common Stock pursuant to
Penalty Conversion Rights or otherwise, the Corporation shall not
declare or pay dividends on shares of Convertible Preferred Stock with
respect to which no dividends are in arrears until no dividends are in
arrears on any shares of Convertible Preferred Stock.
Sixth. Shareholder's cumulative voting rights for the election of directors are
eliminated and denied.
Seventh. (a) The Directors, other than those who may be elected by the holders
of any class or series of stock entitled to elect directors separately, 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 By-laws of the Corporation, one class to be
originally elected for a term expiring at the annual meeting of shareholders to
be held in 1985, another class to be originally elected for a term expiring at
the annual meeting of shareholders to be held in 1986, and another class to be
originally elected for a term expiring at the annual meeting of shareholders to
be held in 1987, with each class to hold office until its successor is elected
and qualified. At each annual meeting of the shareholders of the Corporation,
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
shareholders held in the third year following the year of their election.
(b) Except as otherwise provided for or fixed by or pursuant to the
provisions of Article Fifth hereof relating to the rights of the holders of any
class or series of stock entitled to elect Directors separately, newly created
directorships resulting from any increase in the number of Directors and
separately, 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 by
the Directors in the manner provided in the By-laws of the Corporation, to 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.
(c) Except for the rights of any class or series of stock entitled to
elect Directors separately, any Director may be removed from office, without
assigning any cause, but only by the affirmative vote of the holders of 80
percent of the combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of Directors, voting together as a
single class.
20
(d) Notwithstanding anything contained in the Articles of Incorporation
or By-laws to the contrary, and subject to the rights of any class or series of
stock entitled to elect Directors separately, the affirmative vote of the
holders of at least 80 percent or more of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend
or repeal this Article Seventh or to adopt any provision inconsistent herewith."
Eighth. (a) The holders of all the shares outstanding and entitled to vote may,
by a majority vote, in the manner set forth in the By-laws, alter, amend or
repeal the By-laws of the Corporation, provided, however, that the affirmative
vote of the holders of 80 percent or more of the combined voting power of the
then outstanding shares of stock entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend
or repeal Sections 3.1, 3.4, 3.11 or 8.1 of the By-laws of the Corporation, or
to adopt any provision inconsistent therewith.
(b) The Board of Directors, by a majority vote of the members thereof,
may make, alter, amend or repeal any provisions of the By-laws, in the manner
set forth in the By-laws. The shareholders shall have the right to change such
action by a majority vote of the shareholders entitled to vote thereon at any
Annual Meeting duly convened after notice to the shareholders of such purpose,
provided, however, that the vote of the holders of at least 80 percent of the
combined voting power of all of the then outstanding shares of stock entitled to
vote generally in the election of directors, voting together as a single class,
shall be required to change such action with respect to Sections 3.1, 3.4, 3.11
or 8.1.
(c) Notwithstanding anything contained in the Articles of Incorporation
to the contrary, and subject to the rights of any class or series of stock
entitled to elect Directors separately, the affirmative vote of the holders of
at least 80 percent of the combined voting power of the then outstanding shares
of stock entitled to vote generally in the election of directors, voting
together as a single class, shall be required to alter, amend or repeal this
Article Eighth or to adopt any provision inconsistent herewith.
Ninth. The vote of shareholders of the Corporation required to approve any
Business Combination shall be as set forth in this Article Ninth. The term
"Business Combination" shall have the meaning ascribed to it in (a)(B) of this
Article; each other capitalized term used in this Article shall have the meaning
ascribed to it in (c) of this Article.
(a)(A) In addition to any affirmative vote required by law or the
Articles of Incorporation or any resolution adopted pursuant to Article Fifth of
the Articles of Incorporation, and except as otherwise expressly provided in (b)
of this Article Ninth, a Business Combination shall not be consummated without
the affirmative vote of the holders of at least 80 percent of the combined
voting power of the then outstanding shares of stock of all classes and series
of the Corporation entitled to vote generally in the election of Directors
("Voting Stock"), in each case voting together as a single class (it being
understood that for purposes of this Article Ninth, each share of the Voting
Stock shall have the number of votes granted to it pursuant to Article Fifth of
the Article of Incorporation). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or by the Articles of Incorporation or any
resolution or resolutions adopted pursuant to Article Fifth of the Articles of
Incorporation or in any agreement with any national securities exchange or
otherwise.
(B) The term "Business Combination" as used in this Article Ninth shall
mean:
(1) any merger or consolidation of the Corporation or any
Subsidiary with (i) any Interested Shareholder or (ii) any other
corporation or entity (whether or not itself an Interested
Shareholder) which is, or after each merger or consolidation would be,
an Affiliate of an Interested Shareholder; or
(2) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to
or with any Interested Shareholder or any Affiliate of any Interested
Shareholder of all or a Substantial Part of the assets of the
Corporation or any Subsidiary; or
21
(3) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Shareholder or any
Affiliate of any Interested Shareholder in exchange for cash,
securities or other property (or a combination thereof), other than
the issuance of securities upon the conversion of convertible
securities of the Corporation or any Subsidiary which were not
acquired by such interested Shareholder (or such Affiliate) from the
Corporation or a Subsidiary; or
(4) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Shareholder or any Affiliate of any Interested Shareholder;
or
(5) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving
an interested Shareholder) which in any such case has the effect,
directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class or series of stock or securities
convertible into stock of the Corporation or any Subsidiary which is
directly or indirectly beneficially owned by any Interested
Shareholder or any Affiliate of any Interested Shareholder;
(b) The provisions of (a) of this Article Ninth shall not be applicable
to any Business Combination in respect of which all of the conditions specified
in either of the following paragraphs A and B are met, and such Business
Combination shall require only such affirmative vote as is required by law and
any other provision of the Articles of Incorporation and any resolution or
resolutions of the Board of Directors adopted pursuant to Article Fifth of the
Articles of Incorporation.
(A) Such Business Combination shall have been approved by a majority of
the Disinterested Directors, or
(B) Each of the six conditions specified in the following clauses (1)
through (6) shall have been met:
(1) the aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business
Combination (the "Consummation Date") of any consideration other
than cash to be received by holders of Common Stock in such
Business Combination shall be at least equal to the higher of the
following:
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid in order to acquire any
shares of Common Stock beneficially owned by the Interested
Shareholder which were acquired beneficially by such
Interested Shareholder (x) within the two-year period
immediately prior to the Announcement Date or (y) in the
transaction in which it became an Interested Shareholder,
whichever is higher; or
(ii) the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (the
Determination Date), whichever is higher; and
(2) the aggregate amount of the cash and the Fair Market
Value as of the Consummation Date of any consideration other than
cash to be received per share by holders of shares of any other
class or series of Voting Stock shall be at least equal to the
highest of the following (it being intended that the requirements
of this clause (B)(2) shall be required to be met with respect to
every class and series of such outstanding Voting Stock, whether
or not the Interested Shareholder beneficially owns any shares of
a particular class or series of Voting Stock):
22
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid in order to acquire any
shares of such class or series of Voting Stock beneficially
owned by the Interested Shareholder which were acquired
beneficially by such Interested Shareholder (x) within the
two-year period immediately prior to the Announcement Date
or (y) in the transaction in which it became an interested
Shareholder, whichever is higher;
(ii) (if applicable) the highest preferential amount
per share to which the holders of shares of such class or
series of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation; and
(iii) the Fair Market Value per share of such class or
series of Voting Stock on the Announcement Date or the
Determination Date, whichever is higher; and
(3) the consideration to be received by holders of a
particular class or series of outstanding Voting Stock (including
Common Stock) shall be in cash or in the same form as was
previously paid in order to acquire beneficially shares of such
class or series of Voting Stock that are beneficially owned by
the Interested Shareholder and if the Interested Shareholder
beneficially owns shares of any class or series of Voting Stock
that were acquired with varying forms of consideration, the form
of consideration to be received by holders of such class or
series of Voting Stock shall be either cash or the form used to
acquire beneficially the largest number of shares of such class
or series of Voting Stock beneficially acquired by it prior to
the Announcement Date; and
(4) after such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such
Business Combination:
(i) except as approved by a majority of the
Disinterested Directors, there shall have been no failure to
declare and pay at the regular dates therefor the full
amount of any dividends (whether or not cumulative) payable
on any class or series of stock having preference over the
Common Stock as to dividends or upon liquidation;
(ii) there shall have been (x) no reduction in the
annual rate of dividends paid on the Common Stock (except as
necessary to reflect any subdivision of the Common Stock),
except as approved by a majority of the Disinterested
Directors, and (y) an increase in such annual rate of
dividends (as necessary to prevent any such reduction) in
the event of 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 the Common Stock, unless the failure
so to increase such annual rate was approved by a majority
of the Disinterested Directors; and
(iii) such Interested Shareholder shall not have become
the beneficial owner of any additional shares of Voting
Stock except as part of the transaction in which it became
an Interested Shareholder; and
(5) after such Interested Shareholder has become an
Interested Shareholder, such Interested Shareholder shall not
have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or tax credits
or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination
or otherwise; and
23
(6) a proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act,
rules or regulations) shall be mailed to public shareholders of
the Corporation at least 30 days prior to the consummation of
such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such
Act or subsequent provisions).
(c) For the purposes of this Article Ninth:
(A) A "person" shall mean any individual, firm, corporation or other
entity.
(B) "Interested Shareholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(1) is the beneficial owner, directly or indirectly, of more than
20 percent of the combined voting power of the then outstanding shares
of Voting Stock; or
(2) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 20 percent or more of the
combined voting power of the then outstanding shares of Voting Stock;
or
(3) is an assignee or has otherwise succeeded to the beneficial
ownership of any shares of Voting Stock that were at any time within
the two-year period immediately prior to the date in question
beneficially owned by any Interested Shareholder, 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.
(C) A person shall be a "beneficial owner" of any Voting Stock:
(1) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(2) 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 or direct the vote pursuant to any agreement,
arrangement or understanding; or
(3) which are beneficially owned, directly or indirectly, by any
other 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.
(D) For the purposes of determining whether a person is an Interested
Shareholder pursuant to (c)(B) of this Article Ninth, the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of (c)(C) of this Article but shall not include any
other shares of Voting Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(E) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on May 25, 1984.
24
(F) "Subsidiary" means any corporation of which more than 50 percent
of the combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of directors is owned, directly
or indirectly, by the Corporation or by a Subsidiary or by the Corporation
and one or more Subsidiaries; provided, however, that for the purposes of
the definition of Interested Shareholder set forth in (c)(B) of this
Article Ninth, the term "Subsidiary" shall mean only a corporation of which
a majority of the combined voting power of the then outstanding shares of
stock entitled to vote generally in the election of directors is owned,
directly or indirectly, by the Corporation.
(G) "Disinterested Director" means any member of the Board of
Directors of the Corporation who is unaffiliated with, and not a nominee
of, the Interested Shareholder and was a member of the Board prior to the
time that the Interested Shareholder became an Interested Shareholder, and
any successor of a Disinterested Director who is unaffiliated with, and not
a nominee of, the Interested Shareholder and who is recommended to succeed
a Disinterested Director by a majority of Disinterested Directors then on
the Board of Directors.
(H) "Fair Market Value" means: (1) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date
in question of a share of such stock 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 sales price or bid quotation with respect to
a share of such stock during the 30-day period preceding the date in
question as quoted by the National Association of Securities Dealers, Inc.
Automated Quotations Systems 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 in good faith; and (2) in the case of stock of any class or
series which is not traded on any United States registered securities
exchange nor in the over-the-counter market or 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
in good faith.
(I) In the event of any Business Combination in which the Corporation
survives, the phase "other consideration to be received" as used in
(b)(B)(1) and (2) of this Article Ninth shall include the shares of the
Common Stock and/or the shares of any other class of outstanding Voting
Stock retained by the holders of such shares.
(J) "Announcement Date" means the date of first public announcement of
the proposed Business Combination.
(K) "Determination Date" means the date on which the Interested
Shareholder became an Interested Shareholder.
(L) "Substantial Part" means more than 50 percent of the book value of
the total assets of the entity in question, as of the end of its most
recent fiscal year ending period to the Consummation Date.
(d) A majority of the Disinterested Directors of the Corporation shall
have the right and power to determine, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine compliance with this
Article Ninth, including, without limitation (A) whether a person is an
Interested Shareholder, (B) the number of shares of Voting Stock beneficially
owned by any person, (C) whether a person is an Affiliate or Associate of
another person and (D) whether the requirements of (b) of this Article Ninth
have been met with respect to any Business Combination. The good faith
determination of a majority of the Disinterested Directors on such matters shall
be conclusive and binding for all purposes of this Article Ninth.
(e) Nothing contained in this Article Ninth shall be construed to relieve
any Interested Shareholder from any fiduciary obligation imposed by law.
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(f) Notwithstanding anything contained in the Articles of Incorporation
to the contrary, the affirmative vote of the holders of at least 80 percent of
the voting power of the Voting Stock, voting together as a single class, shall
be required to alter, amend, or repeal this Article Ninth or to adopt any
provision inconsistent herewith.
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