CERTIFICATE OF DESIGNATIONS
OF Series I CONVERTIBLE
PREFERRED STOCK
OF
TIME WARNER INC.
-----------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
-----------------------
TIME WARNER INC., a corporation organized and existing
by virtue of the General Corporation Law of the State of Delaware (as
defined below, the "Corporation"), does hereby certify that the
following resolution was duly adopted by action of the Board of
Directors of the Corporation at a meeting duly held on August 28,
1995.
RESOLVED that pursuant to the authority expressly
granted to and vested in the Board of Directors of the Corporation by
the provisions of Section 2 of Article IV of the Restated Certificate
of Incorporation of the Corporation, as amended from time to time (the
"Certificate of Incorporation"), and Section 151(g) of the General
Corporation Law of the State of Delaware, such Board of Directors
hereby creates, from the authorized shares of Preferred Stock, par
value $1.00 per share (the "Preferred Stock"), of the Corporation
authorized to be issued pursuant to the Certificate of Incorporation,
a series of Preferred Stock, and hereby fixes the voting powers,
designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restric tions
thereof, of the shares of such series as follows:
The series of Preferred Stock hereby established shall
consist of 7.0 million shares designated as Series I Convertible
Preferred Stock. The rights, preferences and limitations of such
series shall be as follows:
1. Definitions. As used herein, the following
terms shall have the indicated meanings:
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1.1 "Accrued Dividend Amount" shall mean the
aggregate amount of accrued and unpaid dividends on a share of Series
I Stock to and including the Conversion Date, except that if the
Conversion Date shall occur after a Record Date and prior to a related
Dividend Payment Date, the Accrued Dividend Amount shall not include
any accrued and unpaid dividends for the period from and after the
most recent Dividend Payment Date.
1.2 "Board of Directors" shall mean the
Board of Directors of the Corporation or, with respect to any action
to be taken by the Board of Directors, any com mittee of the Board of
Directors duly authorized to take such action.
1.3 "Capital Stock" shall mean any and all
shares of corporate stock of a Person (however designated and whether
representing rights to vote, rights to partici pate in dividends or
distributions upon liquidation or otherwise with respect to such
Person, or any division or subsidiary thereof, or any joint venture,
partnership, corporation or other entity).
1.4 "Certificate" shall mean the certificate
of the voting powers, designations, preferences and rela tive,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of Series I Convertible Preferred
Stock filed with respect to this resolution with the Secretary of
State of the State of Delaware pursuant to Section 151 of the General
Corporation Law of the State of Delaware.
1.5 "Change of Control" and "Change of
Control Date" shall have the following meanings: "Change of Control"
shall mean the occurrence of one or both of the following events: (a)
individuals who would constitute a majority of the members of the
Board of Directors elected at any meeting of stockholders or by
written consent (without regard to any members of the Board of
Directors elected pursuant to the terms of any series of Preferred
Stock) shall be elected to the Board of Directors and the election or
the nomination for election by the Corporation's stock holders of such
directors was not approved by a vote of at least a majority of the
directors in office immediately prior to such election (in which event
"Change of Control Date" shall mean the date of such election) or (b)
a Person or group of Persons acting in concert as a partnership,
limited partnership, syndicate or other group within the meaning of
Rule 13d-3 under the Exchange Act (the "Acquiring Person") shall, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases, share repurchases or redemptions or otherwise,
have become the beneficial owner (within the meaning of Rule 13d-3
under the
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Exchange Act) of 40% or more of the outstanding shares of Common Stock
(in which event "Change of Control Date" shall mean the date of the
event resulting in such 40% ownership).
1.6 "Closing Price" of the Common Stock
shall mean the last reported sale price of the Common Stock (regular
way) as shown on the Composite Tape of the NYSE, or, in case no such
sale takes place on such day, the average of the closing bid and asked
prices on the NYSE, or, if the Common Stock is not listed or admitted
to trading on the NYSE, on the principal national securities exchange
on which such stock is listed or admitted to trading, or, if it is not
listed or admitted to trading on any national securi ties exchange,
the last reported sale price of the Common Stock, or, in case no such
sale takes place on such day, the average of the closing bid and asked
prices, in either case as reported by NASDAQ.
1.7 "Common Dividend Deficiency" shall be
applicable in the event that a Conversion Date shall fall after a
record date and prior to the related payment date for a regularly
scheduled cash dividend on the Common Stock (the "Common Dividend
Payment Date"), and in such event shall mean the product of (i) the
Conversion Rate, (ii) the amount per share of Common Stock of the
regularly scheduled cash dividend for which the record date has been
set but a payment date has not yet occurred and (ii) a fraction (A)
the numerator of which is the number of calendar days from and
excluding the Conversion Date (or in the event the Conversion Date
falls after a Record Date and on or prior to a related Dividend
Payment Date, from and excluding the Dividend Payment Date) to and
including the Common Dividend Payment Date and (B) the denominator of
which is 91 (provided that such fraction shall not be greater than one
(1)).
1.8 "Common Dividend Excess" shall be
applicable in all circumstances where a Common Dividend Deficiency is
not applicable, and in such event shall mean the product of (i) the
Conversion Rate, (ii) the regular quarterly cash dividend per share,
if any, paid by the Corporation on the Common Stock (the "Historical
Dividend") on the most recent dividend payment date for the Common
Stock (the "Prior Dividend Payment Date") occurring during the four
months immediately preceding the Conversion Date and (iii) a fraction
(A) the numerator of which is the number of calendar days from and
excluding (1) the Prior Dividend Payment Date to and including (2) the
Conversion Date (or in the event the Conversion Date falls after a
Record Date and on or prior to a related Dividend Payment Date, to and
including the Dividend Payment Date) and (B) the denominator of which
is 91 days (provided that in no event shall the fraction be greater
than one (1)).
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1.9 "Common Stock" shall mean the class of
Common Stock, par value $1.00 per share, of the Corporation authorized
at the date of the Certificate, or any other class of stock resulting
from (x) successive changes or reclassifications of such Common Stock
consisting of changes in par value, or from par value to no par value,
(y) a sub division or combination or (z) any other changes for which
an adjustment is made under Section 3.6(a), and in any such case
including any shares thereof authorized after the date of the
Certificate, together with any associated rights to purchase other
securities of the Corporation which are at the time represented by the
certificates representing such shares of Common Stock.
1.10 "Conversion Date" shall have the
meaning set forth in Section 3.5 hereof.
1.11 "Conversion Price" at any time shall
mean the Liquidation Value per share divided by the Conversion Rate in
effect at such time (rounded to the nearest one hundredth of a cent).
1.12 "Conversion Rate" shall have the
meaning set forth in Section 3.1 hereof.
1.13 "Converting Holder" shall have the
meaning set forth in Section 3.5 hereof.
1.14 "Corporation" shall mean Time Warner
Inc., a Delaware corporation, and any of its successors by operation
of law, including by merger, consolidation or sale or conveyance of
all or substantially all of its property
and assets.
1.15 "Current Market Price" of the Common
Stock on any date shall mean the average of the daily Closing Prices
per share of the Common Stock for the five (5) consecutive Trading
Days ending on the Trading Day immediately preceding the applicable
record date, conversion date, redemption date or exchange date
referred to in Section 3 or Section 4.
1.16 "Dividend Payment Date" shall have the
meaning set forth in Section 2.1 hereof.
1.17 "Effective Time" shall mean the date on
which the Series I Stock.
1.18 "Exchange Act" shall mean Securities
Exchange Act of 1934, as amended.
1.19 "Exchange Price" shall have the meaning
set forth in Section 4.1 hereof.
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1.20 "Junior Stock" shall mean the Common
Stock, the Series A Stock and the shares of any other class or series
of Capital Stock of the Corporation which, by the terms of the
Certificate of Incorporation or of the instru ment by which the Board
of Directors, acting pursuant to authority granted in the Certificate
of Incorporation, shall fix the relative rights, preferences and
limitations thereof, shall be junior to the Series I Stock in respect
of the right to receive dividends or to participate in any
distribution of assets other than by way of dividends.
1.21 "Liquidation Value" shall have the
meaning set forth in Section 7.1 hereof.
1.22 "NASDAQ" shall mean the National
Association of Securities Dealers Automated Quotation
System.
1.23 "Net Dividend Amount" shall have the
meaning set forth in Section 3.1 hereof.
1.24 "NYSE" shall mean the New York Stock
Exchange, Inc.
1.25 "Parity Stock" shall mean the Series B
Stock, the Series C Stock, the Series D Stock, the Series G Stock, the
Series H Stock and the shares of any other class or series of Capital
Stock of the Corporation which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors,
acting pursuant to authority granted in the Certificate of
Incorporation, shall fix the relative rights, preferences and
limitations thereof, shall, in the event that the stated dividends
thereon are not paid in full, be entitled to share ratably with the
Series I Stock in the payment of dividends, including accumulations,
if any, in accordance with the sums which would be payable on such
shares if all dividends were declared and paid in full, or shall, in
the event that the amounts payable thereon on liquidation are not paid
in full, be entitled to share ratably with the Series I Stock in any
distribution of assets other than by way of dividends in accordance
with the sums which would be payable in such distribution if all sums
payable were discharged in full; provided, however, that the term
"Parity Stock" shall be deemed to refer (i) in Section 2.2 hereof, to
any stock which is Parity Stock in respect of dividend rights; (ii) in
Section 7 hereof, to any stock which is Parity Stock in respect of the
distribution of assets; and (iii) in Sections 6.2 and 6.3 hereof, to
any stock which is Parity Stock in respect of either dividend rights
or the distribution of assets and which, pursuant to the Certificate
of Incorporation or any instrument in which the Board of Directors,
acting pursuant to authority granted in the
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Certificate of Incorporation, shall so designate, is entitled to vote
with the holders of Series I Stock.
1.26 "Person" shall mean an individual,
corporation, partnership, joint venture, association, trust,
unincorporated organization or other entity.
1.27 "Preferred Stock" shall mean the class
of Preferred Stock, par value $1.00 per share, of the Corporation
authorized at the date of the Certificate, including any shares
thereof authorized after the date of the Certificate.
1.28 "Pro Rata Portion" shall have the
meaning set forth in Section 5.6 hereof.
1.29 "Pro Rata Repurchase" shall mean the
purchase of shares of Common Stock by the Corporation or by any of its
subsidiaries, whether for cash or other property or securities of the
Corporation, which purchase is subject to Section 13(e) of the
Exchange Act or is made pursuant to an offer made available to all
holders of Common Stock, but excluding any purchase made in open
market transactions that satisfies the conditions of clause (b) of
Rule 10b-18 under the Exchange Act or has been designed (as reasonably
deter mined by the Board of Directors or a committee thereof) to
prevent such purchase from having a material effect on the trading
market of the Common Stock. The "Effective Date" of a Pro Rata
Repurchase shall mean the applicable expiration date (including all
extensions thereof) of any tender or exchange offer which is a Pro
Rata Repurchase or the date of purchase with respect to any Pro Rata
Repurchase which is not a tender or exchange offer.
1.30 "Record Date" shall have the meaning
set forth in Section 2.1 hereof.
1.31 "Redemption Price" shall have the
meaning set forth in Section 4.1 hereof.
1.32 "Redemption Rescission Event" shall
mean the occurrence of (a) any general suspension of trading in, or
limitation on prices for, securities on the principal national
securities exchange on which shares of Common Stock are registered and
listed for trading (or, if shares of Common Stock are not registered
and listed for trading on any such exchange, in the over-the-counter
market) for more than six-and-one-half (6-1/2) consecutive trading
hours, (b) any decline in either the Dow Jones Industrial Average or
the Standard & Poor's Index of 400 Industrial Companies (or any
successor index published by Dow Jones & Company, Inc. or Standard &
Poor's Corporation) by either (i) an amount in excess of 10%, measured
from the close of business
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on any Trading Day to the close of business on the next succeeding
Trading Day during the period commencing on the Trading Day preceding
the day notice of any redemption of shares of this Series is given
(or, if such notice is given after the close of business on a Trading
Day, commencing on such Trading Day) and ending at the earlier of (x)
the time and date fixed for redemption in such notice and (y) the time
and date at which the Corporation shall have irrevoc ably deposited
funds with a designated bank or trust company pursuant to Section 4.4
or (ii) an amount in excess of 15% (or, if the time and date fixed for
redemption is more than 15 days following the date on which notice of
redemption is given, 20%), measured from the close of business on the
Trading Day preceding the day notice of such redemption is given (or,
if such notice is given after the close of business on a Trading Day,
from such Trading Day) to the close of business on any Trading Day on
or prior to the earlier of the dates specified in clauses (x) and (y)
above, (c) a declaration of a banking moratorium or any suspension of
payments in respect of banks by Federal or state authorities in the
United States or (d) the commencement of a war or armed hostilities or
other national or inter national calamity directly or indirectly
involving the United States which in the reasonable judgment of the
Corporation could have a material adverse effect on the market for the
Common Stock.
1.33 "Rescission Date" shall have the
meaning set forth in Section 4.5 hereof.
1.34 "Senior Stock" shall mean the shares
of
any class or series of Capital Stock of the Corporation which, by the
terms of the Certificate of Incorporation or of the instrument by
which the Board of Directors, acting pursuant to authority granted in
the Certificate of Incorporation, shall fix the relative rights,
preferences and limitations thereof, shall be senior to the Series I
Stock in respect of the right to receive dividends or to participate
in any distribution of assets other than by way of dividends.
1.35 "Series A Stock" shall mean the series
of Preferred Stock authorized and designated as Series A Participating
Preferred Stock at the date of the Certifi cate, including any shares
thereof authorized and designated
after the date of the Certificate.
1.36 "Series B Stock" shall mean the series
of Preferred Stock authorized and designated as Series B 6.40%
Preferred Stock at the date of the Certificate, including any shares
thereof authorized and designated after
the date of the Certificate.
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1.37 "Series C Stock" shall mean the series
of Preferred Stock authorized and designated as Series C Convertible
Preferred Stock at the date of the Certificate, including any shares
thereof authorized and designated after
the date of the Certificate.
1.38 "Series D Stock" shall mean the series
of Preferred Stock authorized and designated as Series D Convertible
Preferred Stock at the date of the Certificate, including any shares
thereof authorized and designated after
the date of the Certificate.
1.39 "Series G Stock" shall mean the series
of Preferred Stock authorized and designated as Series G Convertible
Preferred Stock at the date of the Certificate, including any shares
thereof authorized and designated after
the date of the Certificate.
1.40 "Series H Stock" shall mean the series
of Preferred Stock authorized and designated as Series H Convertible
Preferred Stock at the date of the Certificate, including any shares
thereof authorized and designated after
the date of the Certificate.
1.41 "Series I Stock" and "this Series" shall
mean the series of Preferred Stock authorized and designated as the
Series I Convertible Preferred Stock, including any shares thereof
authorized and designated after the date of the Certificate
1.42 "Surrendered Shares" shall have the
meaning set forth in Section 3.5 hereof.
1.43 "Trading Day" shall mean, so long as
the Common Stock is listed or admitted to trading on the NYSE, a day
on which the NYSE is open for the transaction of business, or, if the
Common Stock is not listed or admitted to trading on the NYSE, a day
on which the principal national securities exchange on which the
Common Stock is listed is open for the transaction of business, or, if
the Common Stock is not so listed or admitted for trading on any
national securities exchange, a day on which the National Market
System of NASDAQ is open for the transaction of business.
2. Cash Dividends.
2.1 The holders of the outstanding Series I
Stock shall be entitled to receive quarter-annual dividends, as and
when declared by the Board of Directors out of funds legally available
therefor. Each quarter-annual dividend shall be an amount per share
equal to (i) in the case of each Dividend Payment Date (as defined
below) occurring
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after the Effective Time through the Dividend Payment Date coinciding
with the fourth anniversary of the Effective Time, the greater of (A)
$.9375 per $100 of Liquidation Value of Series I Stock (which is
equivalent to $3.75 per annum), and (B) an amount per $100 of
Liquidation Value of Series I Stock equal to the product of (1) the
Conversion Rate and (2) the aggregate per share amount of regularly
scheduled dividends paid in cash on the Common Stock during the period
from but excluding the immediately preceding Dividend Payment Date to
and including such Dividend Payment Date and (ii) in the case of each
Dividend Payment Date occurring thereafter, an amount per $100 of
Liquidation Value of Series I Stock equal to the product of (1) the
Conversion Rate and (2) the aggregate per share amount of regularly
scheduled dividends paid in cash on the Common Stock during the period
from but excluding the immediately preceding Dividend Payment Date to
and including such Dividend Payment Date. All dividends shall be
payable in cash on or about the first day of March, June, September
and December in each year, beginning on the first such date that is
more than 15 days after the Effective Time, as fixed by the Board of
Directors, or such other dates as are fixed by the Board of Directors
(provided that the fourth anniversary of the Effective Time shall be a
Dividend Payment Date) (each a "Dividend Payment Date"), to the
holders of record of Series I Stock at the close of business on or
about the Trading Day next preceding such first day of March, June,
September and December (or fourth anniversary of the Effec tive Time)
as the case may be, as fixed by the Board of Directors, or such other
dates as are fixed by the Board of Directors (each a "Record Date").
In the case of dividends payable in respect of periods prior to the
fourth anniver sary of the Effective Time, (i) such dividends shall
accrue on each share on a daily basis, whether or not there are
unrestricted funds legally available for the payment of such dividends
and whether or not earned or declared, from and after the day
immediately succeeding the Effective Time and (ii) any such dividends
that become payable for any partial dividend period shall be computed
on the basis of the actual days elapsed in such period. From and after
the fourth anniversary of the Effective Time, dividends on the Series
I Stock (determined as to amount as provided herein) shall accrue to
the extent, but only to the extent, that regularly scheduled cash
dividends are declared by the Board of Directors on the Common Stock
with a payment date after the fourth anniversary of the Effective Time
(or, in the case of Series I Stock originally issued after the fourth
anniver sary of the Effective Time, after the Dividend Payment Date
next preceding such date of original issuance). All divi dends that
accrue in accordance with the foregoing provi sions shall be
cumulative from and after the day immediately succeeding the Effective
Time (or such date of issuance).
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The amount payable to each holder of record on any Dividend Payment
Date shall be rounded to the nearest cent.
2.2 Except as hereinafter provided in this
Section 2.2, unless all dividends on the outstanding shares of Series
I Stock and any Parity Stock that shall have accrued and become
payable as of any date shall have been paid, or declared and funds set
apart for payment thereof, no dividend or other distribution (payable
other than in shares of Junior Stock) shall be paid to the holders of
Junior Stock or Parity Stock, and no shares of Series I Stock, Parity
Stock or Junior Stock shall be purchased, redeemed or otherwise
acquired by the Corporation or any of its subsidiaries (except by
conversion into or exchange for Junior Stock), nor shall any monies be
paid or made available for a purchase, redemption or sinking fund for
the purchase or redemption of any Series I Stock, Junior Stock or
Parity Stock. When dividends are not paid in full upon the shares of
this Series and any Parity Stock, all dividends declared upon shares
of this Series and all Parity Stock shall be declared pro rata so that
the amount of dividends declared per share on this Series and all such
Parity Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the shares of this Series and all such
Parity Stock bear to each other. No interest, or sum of money in lieu
of interest, shall be payable in respect of any dividend payment or
payments on this Series which may be in arrears.
2.3 In case the Corporation shall at any
time distribute (other than a distribution in liquidation of the
Corporation) to the holders of its shares of Common Stock any assets
or property, including debt or equity securities of the Corporation
(other than Common Stock subject to a distribution or reclassification
covered by Section 3.6(a)) or of any other Person (including common
stock of such Person) or cash (but excluding regularly scheduled cash
dividends payable on shares of Common Stock), or in case the
Corporation shall at any time distribute (other than a distribution in
liquidation of the Corpora tion) to such holders rights, options or
warrants to subscribe for or purchase shares of Common Stock
(including shares held in the treasury of the Corporation), or rights,
options or warrants to subscribe for or purchase any other security or
rights, options or warrants to subscribe for or purchase any assets or
property (in each case, whether of the Corporation or otherwise, but
other than any distribu tion of rights to purchase securities of the
Corporation if the holder of shares of this Series would otherwise be
entitled to receive such rights upon conversion of shares of this
Series for Common Stock; provided, however, that if such rights are
subsequently redeemed by the Corporation, such redemption shall be
treated for purposes of this
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Section 2.3 as a cash dividend (but not a regularly scheduled cash
dividend) on the Common Stock), the Corpora tion shall simultaneously
distribute such assets, property, securities, rights, options or
warrants pro rata to the holders of Series I Stock on the record date
fixed for determining holders of Common Stock entitled to participate
in such distribution (or, if no such record date shall be established,
the effective time thereof) in an amount equal to the amount that such
holders of Series I Stock would have been entitled to receive had
their shares of Series I Stock been converted into Common Stock
immediately prior to such record date (or effective time). In the
event of a distri bution to holders of Series I Stock pursuant to this
Section 2.3, such holders shall be entitled to receive fractional
shares or interests only to the extent that holders of Common Stock
are entitled to receive the same. The holders of Series I Stock on the
applicable record date (or effec tive time) shall be entitled to
receive in lieu of such fractional shares or interests the same
consideration as is payable to holders of Common Stock with respect
thereto. If there are no fractional shares or interests payable to
holders of Common Stock, the holders of Series I Stock on the
applicable record date (or effective time) shall receive in lieu of
such fractional shares or interests the fair value thereof as
determined by the Board of Directors.
2.4 If a distribution is made in accordance
with the provisions of Section 2.3, anything in Section 3 to the
contrary notwithstanding, no adjustment pursuant to Section 3 shall be
effected by reason of the distribution of such assets, property,
securities, rights, options or warrants or the subsequent
modification, exercise, expira tion or termination of such securities,
rights, options or warrants.
2.5 In the event that the holders of Common
Stock are entitled to make any election with respect to the kind or
amount of securities or other property receivable by them in any
distribution that is subject to Section 2.3, the kind and amount of
securities or other property that shall be distributable to the
holders of the Series I Stock shall be based on (i) the election, if
any, made by the record holder (as of the date used for determining
the holders of Common Stock entitled to make such election) of the
largest number of shares of Series I Stock in writing to the
Corporation on or prior to the last date on which a holder of Common
Stock may make such an election or (ii) if no such election is timely
made, an assumption that such holder failed to exercise any such
rights (provided that if the kind or amount of securities or other
property is not the same for each nonelecting holder, then the kind
and amount of securities or other property receivable by holders of
the Series I Stock shall be based on the kind or amount of
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securities or other property receivable by a plurality of shares held
by the nonelecting holders of Common Stock). Concurrently with the
mailing to holders of Common Stock of any document pursuant to which
such holders may make an election of the type referred to in this
Section, the Corporation shall mail a copy thereof to the record
holders of the Series I Stock as of the date used for determining the
holders of record of Common Stock entitled to such mailing.
3. Conversion Rights.
3.1 Each holder of a share of this Series
shall have the right at any time or as to any share of this Series
called for redemption or exchange, at any time prior to the close of
business on the date fixed for redemption or exchange (unless the
Corporation defaults in the payment of the Redemption Price or fails
to exchange the shares of this Series for the applicable number of
shares of Common Stock and any cash portion of the Exchange Price or
exercises its right to rescind such redemption pursuant to Section
4.5, in which case such right shall not terminate at the close of
business on such date), to convert such share into (i) a number of
shares of Common Stock equal to 2.08264 shares of Common Stock for
each share of this Series, subject to adjustment as provided in this
Section 3 (such rate, as so adjusted from time to time, is herein
called the "Conversion Rate") plus (ii) a number of shares of Common
Stock equal to
(A) (1) the Accrued Dividend Amount
minus (2) the Common Dividend Excess, if applicable, or plus
(3) the Common Dividend Deficiency, if applicable (the "Net
Dividend Amount"), divided by
(B) the Closing Price of the Common
Stock on the last Trading Day prior to the Conversion
Date;
provided, however, that in the event that the Net Dividend Amount is a
negative number, the number of shares deliver able upon conversion of
a share of Series I Stock shall be equal to
(I) the number of shares determined
pursuant to clause (i) minus
(II) a number of shares equal to
(x) the absolute value of the Net Dividend Amount divided by
(y) the Closing Price of the Common Stock on the last Trading
Day prior to the Conversion Date;
and provided further that, in the event that the Net
Dividend Amount is a positive number, the Corporation shall
13
have the right to deliver cash equal to the Net Dividend Amount or any
portion thereof, in which case its obligation to deliver shares of
Common Stock pursuant to clause (ii) shall be reduced by a number of
shares equal to (x) the aggregate amount of cash so delivered divided
by (y) the Closing Price of the Common Stock on the last Trading Day
prior to the Conversion Date, unless the Corporation shall deliver
cash equal to the entire Net Dividend Amount, in which case its entire
obligation under clause (ii) shall be discharged. The obligations of
the Corporation to issue the Common Stock or make the cash payments
provided by this Section 3.1 shall be absolute whether or not any
accrued dividend by which such issuance or payment is measured has
been declared by the Board of Directors and whether or not the
Corporation would have adequate surplus or net profits to pay such
dividend if declared or is otherwise restricted from making such
dividend.
3.2 Except as provided in this Section 3, no
adjustments in respect of payments of dividends on shares surrendered
for conversion or any dividend on the Common Stock issued upon
conversion shall be made upon the conver sion of any shares of this
Series (it being understood that if the Conversion Date for shares of
Series I Stock occurs after a Record Date and on or prior to a
Dividend Payment Date, the holder of record on such Record Date shall
be entitled to receive the dividend payable with respect to such
shares on the related Dividend Payment Date pursuant to Section 2.1
hereof).
3.3 The Corporation may, but shall not be
required to, in connection with any conversion of shares of this
Series, issue a fraction of a share of Common Stock, and if the
Corporation shall determine not to issue any such fraction, the
Corporation shall, subject to Section 3.6(c), make a cash payment
(rounded to the nearest cent) equal to such fraction multiplied by the
Closing Price of the Common Stock on the last Trading Day prior to the
Conversion Date.
3.4 Any holder of shares of this Series
electing to convert such shares into Common Stock shall surrender the
certificate or certificates for such shares at the office of the
transfer agent or agents therefor (or at such other place as the
Corporation may designate by notice to the holders of shares of this
Series) during regular business hours, duly endorsed to the
Corporation or in blank, or accompanied by instruments of transfer to
the Corporation or in blank, or in form satisfactory to the
Corporation, and shall give written notice to the Corporation at such
office that such holder elects to convert such shares of this Series.
The Corporation shall, as soon as practicable (subject to Section
3.6(d)) after such deposit of certificates for shares of this Series,
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accompanied by the written notice above prescribed, issue and deliver
at such office to the holder for whose account such shares were
surrendered, or to his nominee, certifi cates representing the number
of shares of Common Stock and the cash, if any, to which such holder
is entitled upon such conversion.
3.5 Conversion shall be deemed to have been
made as of the date (the "Conversion Date") that certifi cates for the
shares of this Series to be converted, and the written notice
prescribed in Section 3.4 are received by the transfer agent or agents
for this Series; and the Person entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the
record holder of such Common Stock on such date. Notwithstanding
anything to the contrary contained herein, in the event the
Corporation shall have rescinded a redemption of shares of this Series
pursuant to Section 4.5, any holder of shares of this Series that
shall have surrendered shares of this Series for conversion following
the day on which notice of the subsequently rescinded redemption shall
have been given but prior to the close of business on the later of (a)
the Trading Day next succeeding the date on which public announcement
of the rescission of such redemption shall have been made and (b) the
Trading Day on which the notice of rescission required by Section 4.5
is deemed given pursuant to Section 8.2 (a "Converting Holder"), may
rescind the conversion of such shares surrendered for conversion by
(i) properly completing a form prescribed by the Corporation and
mailed to holders of shares of this Series (including Converting
Holders) with the Corporation's notice of rescis sion, which form
shall provide for the certification by any Converting Holder
rescinding a conversion on behalf of any beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of shares of this Series
that the beneficial ownership (within the meaning of such Rule) of
such shares shall not have changed from the date on which such shares
were surrendered for conversion to the date of such certifi cation and
(ii) delivering such form to the Corporation no later than the close
of business on that date which is ten (10) Trading Days following the
date on which the Corpora tion's notice of rescission is deemed given
pursuant to Section 8.2. The delivery of such form by a Converting
Holder shall be accompanied by (x) any certificates repre senting
shares of Common Stock issued to such Converting Holder upon a
conversion of shares of this Series that shall be rescinded by the
proper delivery of such form (the "Surrendered Shares"), (y) any
securities, evidences of indebtedness or assets (other than cash)
distributed by the Corporation to such Converting Holder by reason of
such Converting Holder's being a record holder of Surrendered Shares
and (z) payment in New York Clearing House funds or other funds
acceptable to the Corporation of an amount equal
15
to the sum of (I) any cash such Converting Holder may have received in
lieu of the issuance of fractional shares upon conversion and (II) any
cash paid or payable by the Corpora tion to such Converting Holder by
reason of such Converting Holder being a record holder of Surrendered
Shares. Upon receipt by the Corporation of any such form properly com
pleted by a Converting Holder and any certificates, securi ties,
evidences of indebtedness, assets or cash payments required to be
returned or made by such Converting Holder to the Corporation as set
forth above, the Corporation shall instruct the transfer agent or
agents for shares of Common Stock and shares of this Series to cancel
any certificates representing Surrendered Shares (which Surrendered
Shares shall be deposited in the treasury of the Corporation) and
reissue certificates representing shares of this Series to such
Converting Holder (which shares of this Series shall be deemed to have
been outstanding at all times during the period following their
surrender for conversion). The Corporation shall, as promptly as
practicable, and in no event more than five (5) Trading Days,
following the receipt of any such properly completed form and any such
certifi cates, securities, evidences of indebtedness, assets or cash
payments required to be so returned or made, pay to the Converting
Holder or as otherwise directed by such Converting Holder any dividend
or other payment made on such shares during the period from the time
such shares shall have been surrendered for conversion to the
rescission of such conversion. All questions as to the validity, form,
eligibility (including time or receipt) and acceptance of any form
submitted to the Corporation to rescind the conver sion of shares of
this Series, including questions as to the proper completion or
execution of any such form or any certification contained therein,
shall be resolved by the Corporation, whose determination shall be
final and binding. The Corporation shall not be required to deliver
certifi cates for shares of Common Stock while the stock transfer
books for such stock or for this Series are duly closed for any
purpose or during any period commencing at a Redemption Rescission
Event and ending at either (i) the time and date at which the
Corporation's right of rescission shall expire pursuant to Section 4.5
if the Corporation shall not have exercised such right or (ii) the
close of business on that day which is ten (10) Trading Days following
the date on which notice of rescission pursuant to Section 4.4 is
deemed given pursuant to Section 8.2 if the Corporation shall have
exercised such right of rescission, but certificates for shares of
Common Stock shall be delivered as soon as practicable after the
opening of such books or the expira tion of such period.
3.6 The Conversion Rate shall be adjusted
from time to time as follows for events occurring after
August 31, 1995:
16
(a) In case the Corporation shall, at
any time or from time to time while any of the Series I Stock
is outstanding, (i) pay a dividend in shares of its Common
Stock, (ii) combine its outstanding shares of Common Stock
into a smaller number of shares, (iii) subdivide its
outstanding shares of Common Stock or (iv) reclassify (other
than by way of a merger that is subject to Section 3.7) its
shares of Common Stock, then the Conversion Rate in effect
immediately before such action shall be adjusted so that
immediately following such event the holders of the Series I
Stock shall be entitled to receive upon conversion or exchange
thereof the kind and amount of shares of Capital Stock of the
Corporation which they would have owned or been entitled to
receive upon or by reason of such event if such shares of
Series I Stock had been converted or exchanged immediately
before the record date (or, if no record date, the effective
date) for such event (it being understood that any
distribution of cash or of Capital Stock (other than Common
Stock), including any distribution of Capital Stock (other
than Common Stock) that shall accompany a reclassification of
the Common Stock, shall be subject to Section 2.3 rather than
this Section 3.6(a)). An adjustment made pursuant to this
Section 3.6(a) shall become effective retroactively
immediately after the record date in the case of a dividend or
distribution and shall become effective retroactively
immediately after the effective date in the case of a
subdivision, combination or reclassification. For the purposes
of this Section 3.6(a), in the event that the holders of
Common Stock are entitled to make any election with respect to
the kind or amount of securities receivable by them in any
transaction that is subject to this Section 3.6(a) (including
any election that would result in all or a portion of the
transaction becoming subject to Sec tion 2.3), the kind and
amount of securities that shall be distributable to the
holders of the Series I Stock shall be based on (i) the
election, if any, made by the record holder (as of the date
used for determining the holders of Common Stock entitled to
make such election) of the largest number of shares of Series
I Stock in writing to the Corporation on or prior to the last
date on which a holder of Common Stock may make such an
election or (ii) if no such election is timely made, an
assumption that such holder failed to exercise any such rights
(provided that if the kind or amount of securi ties is not the
same for each nonelecting holder, then the kind and amount of
securities receivable shall be based on the kind or amount of
securities receivable by a plurality of nonelecting holders of
Common Stock). Concurrently with the mailing to holders of
Common Stock of any document pursuant to which such holders
17
may make an election of the type referred to in this Section,
the Corporation shall mail a copy thereof to the record
holders of the Series I Stock as of the date used for
determining the holders of record of Common
Stock entitled to such mailing.
(b) In case a Change of Control shall
occur, the Conversion Rate in effect immediately prior to the
Change of Control Date shall be increased (but not decreased)
by multiplying such rate by a fraction as follows: (i) in the
case of a Change of Control specified in Section 1.5(a), a
fraction in which the numerator is the Conversion Price prior
to adjustment pursuant hereto and the denominator is the
Current Market Price of the Common Stock at the Change of
Control Date, (ii) in the case of a Change of Control
specified in Section 1.5(b), the greater of the follow ing
fractions: (x) a fraction the numerator of which is the
highest price per share of Common Stock paid by the Acquiring
Person in connection with the transaction giving rise to the
Change of Control or in any trans action within six months
prior to or after the Change of Control Date (the "Highest
Price"), and the denomi nator of which is the Current Market
Price of the Common Stock as of the date (but not earlier than
six months prior to the Change of Control Date) on which the
first public announcement is made by the Acquiring Person that
it intends to acquire or that it has acquired 40% or more of
the outstanding shares of Common Stock (the "Announcement
Date") or (y) a frac tion the numerator of which is the
Conversion Price prior to adjustment pursuant hereto and the
denominator of which is the Current Market Price of the Common
Stock on the Announcement Date and (iii) in the case where
there co-exists a Change of Control specified in both Section
1.5(a) and Section 1.5(b), the greatest of the fractions
determined pursuant to clauses (i) and (ii). Such adjustment
shall become effective immedi ately after the Change of
Control Date and shall be made, in the case of clauses (ii)
and (iii) above, successively for six months thereafter in the
event and at the time of any increase in the Highest Price
after the Change of Control Date; provided, however, that no
such successive adjustment shall be made with respect to the
Conversion Rate of the shares of this Series in respect of any
event occurring after the Conversion Date.
(c) The Corporation shall be entitled
to make such additional adjustments in the Conversion Rate, in
addition to those required by subsec tions 3.6(a) and 3.6(b),
as shall be necessary in order that any dividend or
distribution in Common Stock or
18
any subdivision, reclassification or combination of shares of
Common Stock referred to above, shall not be taxable to the
holders of Common Stock for United States Federal income tax
purposes so long as such additional adjustments pursuant to
this Section 3.6(c) do not decrease the Conversion Rate.
(d) In any case in which this
Section 3.6 shall require that any adjustment be made
effective as of or retroactively immediately following a
record date, the Corporation may elect to defer (but only for
five (5) Trading Days following the occurrence of the event
which necessitates the filing of the statement referred to in
Section 3.6(f)) issuing to the holder of any shares of this
Series converted after such record date (i) the shares of
Common Stock and other Capital Stock of the Corporation
issuable upon such conversion over and above (ii) the shares
of Common Stock and other Capital Stock of the Corporation
issuable upon such conversion on the basis of the Conversion
Rate prior to adjustment; provided, however, that the
Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the
event requiring such adjustment.
(e) All calculations under this
Section 3 shall be made to the nearest cent, one-hundredth of
a share or, in the case of the Conversion Rate, one
hundred-thousandth. Notwithstanding any other provision of
this Section 3, the Corporation shall not be required to make
any adjustment of the Conversion Rate unless such adjustment
would require an increase or decrease of at least 1.00000% of
such Conversion Rate. Any lesser adjustment shall be carried
forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment
or adjustments so carried forward, shall amount to an increase
or decrease of at least 1.00000% in such rate. Any adjustments
under this Section 3 shall be made successively whenever an
event requiring such an adjustment occurs.
(f) Whenever an adjustment in the
Conversion Rate is required, the Corporation shall forthwith
place on file with its transfer agent or agents for this
Series a statement signed by a duly authorized officer of the
Corporation, stating the adjusted Conversion Rate determined
as provided herein. Such statements shall set forth in
reasonable detail such facts as shall be necessary to show the
reason for and the manner of computing such adjustment.
Promptly after the adjustment of the Conversion Rate, the
19
Corporation shall mail a notice thereof to each holder of
shares of this Series.
(g) In the event that at any time as a
result of an adjustment made pursuant to this Section 3, the
holder of any share of this Series thereafter surrendered for
conversion shall become entitled to receive any shares of
Capital Stock of the Corporation other than shares of Common
Stock, the conversion rate of such other shares so receivable
upon conversion of any such share of this Series shall be
subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions
with respect to Common Stock contained in subparagraphs (a)
through (f) and (h) of this Section 3.6, and the provisions of
Section 3.1 through 3.5 and 3.7 through 3.10 shall apply on
like or similar terms to any such other shares and the
determination of the Board of Directors as to any such
adjustment shall be conclusive.
(h) No adjustment shall be made
pursuant to this Section 3.6 (i) if the effect thereof would
be to reduce the Conversion Price below the par value of the
Common Stock or (ii) subject to Section 3.6(c) hereof, with
respect to any share of Series I Stock that is converted,
prior to the time such adjustment otherwise would be made.
3.7 In case after August 31, 1995 (a) any
consolidation or merger to which the Corporation is a party, other
than a merger or consolidation in which the Corpora tion is the
surviving or continuing corporation and which does not result in any
reclassification of, or change (other than a change in par value or
from par value to no par value or from no par value to par value, or
as a result of a sub division or combination) in, outstanding shares
of Common Stock or (b) any sale or conveyance of all or substantially
all of the property and assets of the Corporation, then lawful
provision shall be made as part of the terms of such transaction
whereby the holder of each share of Series I Stock shall have the
right thereafter, during the period such share shall be convertible or
exchangeable, to convert such share into or have such share exchanged
for the kind and amount of shares of stock or other securities and
property receivable upon such consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock into
which such shares of this Series could have been converted or
exchanged immediately prior to such consolida tion, merger, sale or
conveyance, subject to adjustment which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section
3 (based on (i) the election, if any, made in writing to the
Corporation
20
by the record holder (as of the date used for determining holders of
Common Stock entitled to make such election) of the largest number of
shares of Series I Stock on or prior to the last date on which a
holder of Common Stock may make an election regarding the kind or
amount of securities or other property receivable by such holder in
such transaction or (ii) if no such election is timely made, an
assumption that such holder failed to exercise any such rights (pro
vided that if the kind or amount of securities or other property is
not the same for each nonelecting holder, then the kind and amount of
securities or other property receiv able shall be based upon the kind
and amount of securities or other property receivable by a plurality
of the non electing holders of Common Stock)). In the event that any
of the transactions referred to in clauses (a) or (b) involves the
distribution of cash (or property other than equity securities) to a
holder of Common Stock, lawful provision shall be made as part of the
terms of the trans action whereby the holder of each share of Series I
Stock on the record date fixed for determining holders of Common Stock
entitled to receive such cash or property (or if no such record date
is established, the effective date of such transaction) shall be
entitled to receive the amount of cash or property that such holder
would have been entitled to receive had such holder converted his
shares of Series I Stock into Common Stock immediately prior to such
record date (or effective date) (based on the election or nonelec tion
made by the record holder of the largest number of shares of Series I
Stock, as provided above). Concurrently with the mailing to holders of
Common Stock of any document pursuant to which such holders may make
an election regard ing the kind or amount of securities or other
property that will be receivable by such holder in any transaction des
cribed in clause (a) or (b) of the first sentence of this Section 3.7,
the Corporation shall mail a copy thereof to the holders of the Series
I Stock as of the date used for determining the holders of record of
Common Stock entitled to such mailing. The Corporation shall not enter
into any of the transactions referred to in clauses (a) or (b) of the
preceding sentence unless effective provision shall be made in the
certificate or articles of incorporation or other constituent
documents of the Corporation or the entity surviving the consolidation
or merger, if other than the Corporation, or the entity acquiring the
Corporation's assets, as the case may be, so as to give effect to the
provisions set forth in this Section 3.7. The provisions of this
Section 3.7 shall apply similarly to successive con solidations,
mergers, sales or conveyances. For purposes of this Section 3.7 the
term "Corporation" shall refer to the Corporation (as defined in
Section 1.14) as constituted immediately prior to the merger,
consolidation or other transaction referred to in this Section.
21
3.8 The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of its
authorized but unissued stock, for the purpose of effecting the
conversion of the shares of this Series, such number of its duly
authorized shares of Common Stock (or, if applicable, any other shares
of Capital Stock of the Corporation) as shall from time to time be
sufficient to effect the conversion of all outstanding shares of this
Series into such Common Stock (or such other shares of Capital Stock)
at any time (assuming that, at the time of the computation of such
number of shares, all such Common Stock (or such other shares of
Capital Stock) would be held by a single holder); provided, however,
that nothing contained herein shall preclude the Corporation from
satisfying its obligations in respect of the conversion of the shares
by delivery of purchased shares of Common Stock (or such other shares
of Capital Stock) that are held in the treasury of the Corporation.
All shares of Common Stock (or such other shares of Capital Stock of
the Corporation) which shall be deliverable upon conversion of the
shares of this Series shall be duly and validly issued, fully paid and
nonassessable. For purposes of this Section 3, any shares of Common
Stock at any time outstanding shall not include shares held in the
treasury of the Corporation.
3.9 If any shares of Common Stock or other
shares of Capital Stock of the Corporation which would be issuable
upon conversion of shares of this Series hereunder require
registration with or approval of any governmental authority before
such shares may be issued upon conversion, the Corporation will in
good faith and as expeditiously as possible cause such shares to be
duly registered or approved, as the case may be. The Corporation will
use commercially reasonable efforts to list the shares of (or
depositary shares representing fractional interests in) Common Stock
or other shares of Capital Stock of the Corporation required to be
delivered upon conversion of shares of this Series prior to such
delivery upon the principal national securities exchange upon which
the out standing Common Stock or such other shares of Capital Stock is
listed at the time of such delivery.
3.10 The Corporation shall pay any and all
issue or other taxes that may be payable in respect of any issue or
delivery of shares of Common Stock or other shares of Capital Stock of
the Corporation on conversion of shares of this Series pursuant
hereto. The Corporation shall not, however, be required to pay any tax
which is payable in respect of any transfer involved in the issue or
delivery of Common Stock or such other shares of Capital Stock in a
name other than that in which the shares of this Series so converted
were registered, and no such issue or delivery shall be made unless
and until the Person requesting such
22
issue has paid to the Corporation the amount of such tax, or
has established, to the satisfaction of the Corporation,
that such tax has been paid.
3.11 In case of (i) the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation,
(ii) any Pro Rata Repurchase or (iii) any action triggering an
adjustment to the Conversion Rate pursuant to this Section 3, then, in
each case, the Corporation shall cause to be filed with the transfer
agent or agents for the Series I Stock, and shall cause to be mailed,
first-class postage prepaid, to the holders of record of the
outstanding shares of Series I Stock, at least fifteen (15) days prior
to the applicable record date for any such transaction (or if no
record date will be estab lished, the effective date thereof), a
notice stating (x) the date, if any, on which a record is to be taken
for the purpose of any such transaction (or if no record date will be
established, the date as of which holders of record of Common Stock
entitled to participate in such transaction are determined), and (y)
the expected effective date thereof. Failure to give such notice or
any defect therein shall not affect the legality or validity of the
proceedings described in this Section 3.11.
4. Redemption or Exchange.
4.1 (a) The Corporation may, at its sole
option, subject to Section 2.2 hereof, from time to time on and after
the fourth anniversary of the Effective Time, redeem, out of funds
legally available therefor, or, as provided below, exchange shares of
Common Stock for, all or (in the case of Section 4.1(b)(i), any part)
of the outstanding shares of this Series. The redemption price for
each share of this Series called for redemption pursuant to clause (i)
of Section 4.1(b) shall be the Liquidation Value together with an
amount equal to the accrued and unpaid dividends to the date fixed for
redemption (hereinafter collectively referred to as the "Redemption
Price"). The exchange price for each share of this Series called for
exchange pursuant to clause (ii) of Section 4.1(b) shall be a number
of shares of Common Stock equal to the Conversion Rate, together with,
at the option of the Corporation, either (x) cash or (y) a number of
shares of Common Stock, valued at the Closing Price on the Trading Day
immediately preceding the date fixed for exchange, equal, in either
case, to the aggregate amount of accrued and unpaid dividends on the
Series I Stock to the date fixed for exchange (provided that any
dividends which are in arrears must be paid in cash) (hereinafter
collectively referred to as the "Exchange Price").
23
(b) On the date fixed for redemption or
exchange the Corporation shall, at its option, effect either
(i) a redemption of the shares of
this Series to be redeemed by way of payment, out of funds
legally available therefor, of cash equal to the aggregate
Redemption Price for the shares of this Series then being
redeemed;
(ii) an exchange of the shares of
this Series for the Exchange Price in shares of Common Stock
(provided that the Corporation (A) shall be entitled to
deliver cash (1) in lieu of any fractional share of Common
Stock (determined in a manner consis tent with Section 3.3)
and (2) equal to accrued and unpaid dividends to the date
fixed for exchange in lieu of shares of Common Stock and (B)
shall be required to deliver cash in respect of any dividends
that are in arrears); or
(iii) any combination thereof with
respect to each share of this Series called for redemp
tion or exchange.
(c) Notwithstanding clauses (ii) and
(iii) of Section 4.1(b), the Corporation shall be entitled to effect
an exchange of shares of Series I Stock for Common Stock or other
shares of Capital Stock of the Corporation only to the extent that
duly and validly issued, fully paid and nonassessable shares of Common
Stock (or such other shares of Capital Stock) shall be available for
issuance (including delivery of previously issued shares of Common
Stock held in the Corporation's treasury on the date fixed for
exchange). The Corporation shall comply with Sec tions 3.9 and 3.10
with respect to shares of Common Stock or other shares of Capital
Stock of the Corporation which would be issuable upon exchange of
shares of this Series. Cer tificates for shares of Common Stock issued
in exchange for surrendered shares of this Series pursuant to this Sec
tion 4.1 shall be made available by the Corporation not later than the
fifth Trading Day following the date for exchange.
4.2 In the event that fewer than all the
outstanding shares of this Series are to be redeemed pursuant to
Section 4.1(b)(i), the number of shares to be redeemed from each
holder of shares of this Series shall be determined by the Corporation
by lot or pro rata or by any other method as may be determined by the
Board of Directors in its sole discretion to be equitable, and the
certificate of the Corporation's Secretary or an Assistant Secretary
filed with the transfer agent or transfer agents for this
24
Series in respect of such determination by the Board of Directors
shall be conclusive.
4.3 In the event the Corporation shall
redeem or exchange shares of this Series pursuant to Section 4.1,
notice of such redemption or exchange shall be given by first class
mail, postage prepaid, mailed not less than fifteen (15) nor more than
sixty (60) days prior to the date fixed for redemption or exchange, as
the case may be, to each record holder of the shares to be redeemed or
exchanged, at such holder's address as the same appears on the books
of the Corporation. Each such notice shall state: (i) whether the
shares of this Series are to be redeemed or exchanged; (ii) the time
and date as of which the redemption or exchange shall occur; (iii) the
total number of shares of this Series to be redeemed or exchanged and,
if fewer than all the shares held by such holder are to be redeemed,
the number of such shares to be redeemed from such holder; (iv) the
Redemption Price or the Exchange Price, as the case may be; (v) that
shares of this Series called for redemption or exchange may be
converted at any time prior to the time and date fixed for redemption
or exchange (unless the Corporation shall, in the case of a
redemption, default in payment of the Redemption Price or, in the case
of an exchange, fail to exchange the shares of this Series for the
applicable number of shares of Common Stock and any cash portion of
the Exchange Price or shall exercise its right to rescind such
redemption pursuant to Section 4.5, in which case such right of
conversion shall not terminate at such time and date); (vi) the
applicable Conversion Price and Conversion Rate; (vii) the place or
places where certifi cates for such shares are to be surrendered for
payment of the Redemption Price, in the case of redemption, or for
delivery of certificates representing the shares of Common Stock and
the payment of any cash portion of the Exchange Price, in the case of
exchange; and (viii) that dividends on the shares of this Series to be
redeemed or exchanged will cease to accrue on such redemption or
exchange date.
4.4 If notice of redemption or exchange
shall have been given by the Corporation as provided in Section 4.3,
dividends on the shares of this Series so called for redemption or
exchange shall cease to accrue, such shares shall no longer be deemed
to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation with respect to shares so called for
redemption or exchange (except (i) in the case of redemption, the
right to receive from the Corporation the Redemption Price without
interest and in the case of exchange, the right to receive from the
Corporation the Exchange Price without interest and (ii) the right to
convert such shares in accordance with Section 3) shall cease
(including any right to receive dividends otherwise payable on any
Dividend Payment Date
25
that would have occurred after the time and date of redemp tion or
exchange) either (i) in the case of a redemption or exchange pursuant
to Section 4.1, from and after the time and date fixed in the notice
of redemption or exchange as the time and date of redemption or
exchange (unless the Corporation shall (x) in the case of a
redemption, default in the payment of the Redemption Price, (y) in the
case of an exchange, fail to exchange the applicable number of shares
of Common Stock and any cash portion of the Exchange Price or (z)
exercise its right to rescind such redemption pursuant to Section 4.5,
in which case such rights shall not terminate at such time and date)
or (ii) if the Corporation shall so elect and state in the notice of
redemption or exchange, from and after the time and date (which date
shall be the date fixed for redemption or exchange or an earlier date
not less than fifteen (15) days after the date of mailing of the
redemption or exchange notice) on which the Corporation shall
irrevocably deposit with a designated bank or trust company doing
business in the Borough of Manhattan, City and State of New York, as
paying agent, money suffi cient to pay at the office of such paying
agent, on the redemption date, the Redemption Price, in the case of
redemption, or certificates representing the shares of Common Stock to
be so exchanged and any cash portion of the Exchange Price, in the
case of an exchange. Any money or certificates so deposited with any
such paying agent which shall not be required for such redemption or
exchange because of the exercise of any right of conversion or other
wise shall be returned to the Corporation forthwith. Upon surrender
(in accordance with the notice of redemption or exchange) of the
certificate or certificates for any shares of this Series to be so
redeemed or exchanged (properly endorsed or assigned for transfer, if
the Corporation shall so require and the notice of redemption or
exchange shall so state), such shares shall be redeemed or exchanged
by the Corporation at the Redemption Price or the Exchange Price, as
applicable, as set forth in Section 4.1 (unless the Corporation shall
have exercised its right to rescind such redemption pursuant to
Section 4.5). In case fewer than all the shares represented by any
such certificate are to be redeemed, a new certificate shall be issued
representing the unredeemed shares (or fractions thereof as provided
in Section 8.4), without cost to the holder thereof, together with the
amount of cash, if any, in lieu of fractional shares other than those
issuable in accordance with Sec tion 8.4. Subject to applicable
escheat laws, any moneys so set aside by the Corporation in the case
of redemption and unclaimed at the end of one year from the redemption
date shall revert to the general funds of the Corporation, after which
reversion the holders of such shares so called for redemption or
exchange shall look only to the general funds of the Corporation for
the payment of the Redemption Price or the Exchange Price, as
applicable, without interest. Any
26
interest accrued on funds so deposited shall be paid to the
Corporation from time to time.
4.5 In the event that a Redemption
Rescission Event shall occur following any day on which a notice of
redemption shall have been given pursuant to Section 4.3 but at or
prior to the earlier of (a) the time and date fixed for redemption as
set forth in such notice of redemption and (b) the time and date at
which the Corporation shall have irrevocably deposited funds or
certificates with a designated bank or trust company pursuant to
Section 4.4, the Corporation may, at its sole option, at any time
prior to the earliest of (i) the close of business on that day which
is two (2) Trading Days following such Redemption Rescission Event,
(ii) the time and date fixed for redemption as set forth in such
notice and (iii) the time and date on which the Corporation shall have
irrevocably deposited such funds with a designated bank or trust
company, rescind the redemption to which such notice of redemption
shall have related by making a public announcement of such rescission
(the date on which such public announcement shall have been made being
hereinafter referred to as the "Rescission Date"). The Corporation
shall be deemed to have made such announcement if it shall issue a
release to the Dow Jones News Service, Reuters Information Services or
any successor news wire service. From and after the making of such
announcement, the Corporation shall have no obligation to redeem
shares of this Series called for redemption pursuant to such notice of
redemption or to pay the redemption price therefor and all rights of
holders of shares of this Series shall be restored as if such notice
of redemption had not been given. The Corporation shall give notice of
any such rescission by one of the means specified in Section 8.2 as
promptly as practicable, but in no event later than the close of
business on that date which is five (5) Trading Days following the
Rescission Date to each record holder of shares of this Series at the
close of business on the Rescission Date and to any other Person or
entity that was a record holder of shares of this Series and that
shall have surrendered shares of this Series for conversion following
the giving of notice of the subsequently rescinded redemp tion. Each
notice of rescission shall (w) state that the redemption described in
the notice of redemption has been rescinded, (x) state that any
Converting Holder shall be entitled to rescind the conversion of
shares of this Series surrendered for conversion following the day on
which notice of redemption was given but prior to the close of
business on the later of (1) the Trading Day next succeeding the date
on which public announcement of the rescission of such redemption
shall have been made and (2) the Trading Day on which the
Corporation's notice of rescission is deemed given pursuant to Section
8.2, (y) be accompanied by a form
27
prescribed by the Corporation to be used by any Converting Holder
rescinding the conversion of shares so surrendered for conversion (and
instructions for the completion and delivery of such form, including
instructions with respect to payments that may be required to
accompany such delivery shall be in accordance with Section 3.5) and
(z) state that such form must be properly completed and received by
the Corporation no later than the close of business on a date that
shall be ten (10) Trading Days following the date of the mailing of
such notice of rescission is deemed given pursuant to Section 8.2.
4.6 The shares of this Series shall not be
subject to the provisions of Section 5 of Article IV of the
Certificate of Incorporation.
5. Pro Rata Repurchase.
5.1 Upon a Pro Rata Repurchase, each holder
of shares of this Series shall have the right to require that the
Corporation repurchase, out of funds legally available therefor, a Pro
Rata Portion (as defined below) of the shares of such holder, or any
lesser number requested by the holder, at a price per share equal to
the highest price per share of Common Stock paid in the Pro Rata
Repurchase multiplied by the Conversion Rate then in effect plus an
amount equal to the accrued but unpaid dividends on such shares to the
date of repurchase.
5.2 At any time prior to or within thirty
(30) days following any Pro Rata Repurchase, the Corporation shall
mail a notice to each holder of shares of this Series stating:
(a) that a Pro Rata Repurchase will
occur or has occurred and that such holder will have (upon
such Pro Rata Repurchase) or has the right to require the
Corporation to repurchase such holder's shares in an amount
not in excess of the Pro Rata Portion at a repurchase price in
cash determined as set forth above plus an amount equal to
accrued and unpaid dividends, if any, to the date of
repurchase;
(b) the repurchase date for the Series
I Stock (which shall be no earlier than fifteen (15) days nor
later than sixty (60) days from the date such notice is
mailed); and
(c) the instructions determined by the
Corporation, consistent with this Section, that a holder must
follow in order to have its shares repurchased.
28
5.3 Holders electing to have any shares
repurchased will be required to surrender such shares, with an
appropriate form duly completed, to the Corporation at the address
specified in the notice at least five (5) days prior to the repurchase
date. Holders will be entitled to withdraw their election if the
Corporation receives, not later than three (3) days prior to the
repurchase date, a telegram, telex, facsimile transmission or letter
setting forth the name of the holder, the certificate numbers of the
shares delivered for purchase by the holder and a statement that such
holder is withdrawing his election to have such shares repurchased.
Holders will have such additional withdrawal and other rights as may
be required pursuant to applicable law.
5.4 On the repurchase date, the Corporation
shall (i) pay the repurchase price plus an amount equal to accrued and
unpaid dividends as provided in Section 5.1, if any, to the holders
entitled thereto and (ii) issue to such holders any equity securities
of the Corporation (other than Common Stock) that would at the time be
issuable upon conversion of the shares of Series I Stock which are
then being repurchased pursuant hereto.
5.5 The Board of Directors will not approve
any tender or exchange offer by the Corporation or a third party for
shares of Common Stock or recommend that the holders of Common Stock
accept any offer or tender their shares into any offer unless a Pro
Rata Portion of the shares of this Series of all holders are entitled
to be tendered into such offer at a price not less than the price per
share for shares of Common Stock pursuant to such offer multiplied by
the Conversion Rate then in effect plus an amount equal to accrued but
unpaid dividends on such shares to the date of payment for such shares
in such tender or exchange offer.
5.6 For purposes hereof, "Pro Rata Portion"
with respect to the shares of this Series held by any holder shall
mean all the shares of this Series then owned by such holder times a
fraction, the numerator of which is the number of outstanding shares
of Common Stock (a) purchased in the applicable Pro Rata Repurchase or
(b) for which a tender or exchange offer referred to in Section 5.5 is
made, as the case may be, and the denominator of which is the number
of outstanding shares of Common Stock immediately prior to such Pro
Rata Repurchase or the commencement of such tender or exchange offer,
as the case may be.
6. Voting. The shares of this Series shall
have no voting rights except as required by law or as set
forth below.
29
6.1 Each share of this Series shall be
entitled to vote together with holders of the shares of Common Stock
(and any other class or series which may similarly be entitled to vote
with the shares of Common Stock) as a single class upon all matters
upon which holders of Common Stock are entitled to vote. In any such
vote, the holders of this Series shall be entitled to two (2) votes
per $100 of Liquidation Value of Series I Stock, subject to adjustment
at the same time and in the same manner as each adjustment of the
Conversion Rate pursuant to Section 3, so that the holders of this
Series shall be entitled following such adjustment to the number of
votes equal to the number of votes such holders were entitled to under
this Section 6.1 immediately prior to such adjustment multiplied by a
fraction (x) the numerator of which is the Conversion Rate as adjusted
pursuant to Section 3 and (y) the denominator of which is the
Conversion Rate immediately prior to such adjustment.
6.2 (a) So long as any shares of this
Series remain outstanding, unless a greater percentage shall then be
required by law, the Corporation shall not, without the affirmative
vote at a meeting or the written consent with or without a meeting of
the holders of shares of this Series representing at least 66-2/3% of
the aggregate voting power of shares of this Series then outstanding
(i) autho rize any Senior Stock or reclassify (by merger, consolida
tion or otherwise) any Junior Stock or Parity Stock as Senior Stock,
(ii) merge into or consolidate with any Person where the surviving or
continuing corporation will have any authorized Senior Stock other
than capital stock correspond ing to shares of Senior Stock of the
Corporation existing immediately before such merger or consolidation)
or (iii) amend, alter or repeal (by operation of law or other wise)
any of the provisions of the Certificate or the Certificate of
Incorporation, so as in any such case to adversely affect the voting
powers, designations, prefer ences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions of the shares of this Series.
(b) No consent of holders of shares of
this Series shall be required for (i) the creation of any indebtedness
of any kind of the Corporation, (ii) the authorization or issuance of
any class of Junior Stock or Parity Stock, (iii) the authorization,
designation or issu ance of additional shares of Series I Stock or
(iv) subject to Section 6.2(a), the authorization or issuance of any
other shares of Preferred Stock.
6.3 (a) If and whenever at any time or
times dividends payable on shares of this Series shall have been in
arrears and unpaid in an aggregate amount equal to
30
or exceeding the amount of dividends payable thereon for six quarterly
dividend periods, then the number of directors constituting the Board
of Directors shall be increased by two and the holders of shares of
this Series, together with the holders of any shares of any Parity
Stock as to which in each case dividends are in arrears and unpaid in
an aggre gate amount equal to or exceeding the amount of dividends
payable thereon for six quarterly dividend periods, shall have the
exclusive right, voting separately as a class with such other series,
to elect two directors of the Corporation.
(b) Such voting right may be exercised
initially either by written consent or at a special meeting of the
holders of the Preferred Stock having such voting right, called as
hereinafter provided, or at any annual meeting of stockholders held
for the purpose of electing directors, and thereafter at each such
annual meeting until such time as all dividends in arrears on the
shares of this Series shall have been paid in full and all dividends
payable on the shares of this Series on four subsequent consecutive
Dividend Payment Dates shall have been paid in full on such dates or
funds shall have been set aside for the payment thereof, at which time
such voting right and the term of the directors elected pursuant to
Section 6.3(a) shall terminate.
(c) At any time when such voting right
shall have vested in holders of shares of such series of Preferred
Stock described in Section 6.3(a), and if such right shall not already
have been exercised by written consent, a proper officer of the
Corporation may call, and, upon the written request, addressed to the
Secretary of the Corporation, of the record holders of shares
representing ten percent (10%) of the voting power of the shares then
outstanding of such Preferred Stock having such voting right, shall
call, a special meeting of the holders of such Preferred Stock having
such voting right. Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of
stockholders at the place for holding annual meetings of stockholders
of the Corporation, or, if none, at a place designated by the Board of
Directors. Notwithstanding the provisions of this Section 6.3(c), no
such special meeting shall be called during a period within 60 days
immediately preceding the date fixed for the next annual meeting of
stockholders.
(d) At any meeting held for the purpose
of electing directors at which the holders of such Preferred Stock
shall have the right to elect directors as provided herein, the
presence in Person or by proxy of the holders of shares representing
more than fifty percent (50%) in voting power of the then outstanding
shares of such Preferred Stock
31
having such right shall be required and shall be sufficient to
constitute a quorum of such class for the election of directors by
such class.
(e) Any director elected by holders of
Preferred Stock pursuant to the voting right created under this
Section 6.3 shall hold office until the next annual meeting of
stockholders (unless such term has previously terminated pursuant to
Section 6.3(b)) and any vacancy in respect of any such director shall
be filled only by vote of the remaining director so elected, or if
there be no such remaining director, by the holders of such Preferred
Stock, entitled to elect such director or directors by written consent
or at a special meeting called in accordance with the procedures set
forth in Section 6.3(c), or, if no special meeting is called or
written consent executed, at the next annual meeting of stockholders.
Upon any termina tion of such voting right, subject to applicable law,
the term of office of all directors elected by holders of such
Preferred Stock voting separately as a class pursuant to this Section
6.3 shall terminate.
(f) In exercising the voting rights set
forth in this Section 6.3, each share of this Series shall have a
number of votes equal to its Liquidation Value.
7. Liquidation Rights.
7.1 Upon the dissolution, liquidation or
winding up of the Corporation, whether voluntary or involun tary, the
holders of the shares of this Series shall be entitled to receive out
of the assets of the Corporation available for distribution to
stockholders, in preference to the holders of, and before any payment
or distribution shall be made on, Junior Stock, the amount of $100 per
share (the "Liquidation Value"), plus an amount equal to all accrued
and unpaid dividends to the date of final distribution.
7.2 Neither the sale, exchange or other con
veyance (for cash, shares of stock, securities or other con
sideration) of all or substantially all the property and assets of the
Corporation nor the merger or consolidation of the Corporation into or
with any other corporation, or the merger or consolidation of any
other corporation into or with the Corporation, shall be deemed to be
a dissolution, liquidation or winding up, voluntary or involuntary,
for the purposes of this Section 7.
7.3 After the payment to the holders of the
shares of this Series of full preferential amounts provided for in
this Section 7, the holders of this Series as such shall have no right
or claim to any of the remaining assets of the Corporation.
32
7.4 In the event the assets of the Corpora
tion available for distribution to the holders of shares of this
Series upon any dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, shall be insufficient
to pay in full all amounts to which such holders are entitled pursuant
to Section 7.1, no such distribution shall be made on account of any
shares of any Parity Stock upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on
account of the shares of this Series, ratably, in propor tion to the
full distributable amounts for which holders of all Parity Stock are
entitled upon such dissolution, liquidation or winding up.
8. Other Provisions.
8.1 All notices from the Corporation to the
holders shall be given by one of the methods specified in Section 8.2.
With respect to any notice to a holder of shares of this Series
required to be provided hereunder, neither failure to give such
notice, nor any defect therein or in the transmission thereof, to any
particular holder shall affect the sufficiency of the notice or the
validity of the proceedings referred to in such notice with respect to
the other holders or affect the legality or validity of any
distribution, right, warrant, reclassification, consoli dation,
merger, conveyance, transfer, dissolution, liquida tion or winding up,
or the vote upon any such action. Any notice which was mailed in the
manner herein provided shall be conclusively presumed to have been
duly given whether or not the holder receives the notice.
8.2 All notices and other communications
hereunder shall be deemed given (i) on the first Trading Day following
the date received, if delivered personally, (ii) on the Trading Day
following timely deposit with an overnight courier service, if sent by
overnight courier specifying next day delivery and (iii) on the first
Trading Day that is at least five days following deposit in the mails,
if sent by first class mail to (x) a holder at its last address as it
appears on the transfer records or registry for the Series I Stock and
(y) the Corporation at the following address (or at such other address
as the Corporation shall specify in a notice pursuant to this
Section): Time Warner Inc., 75 Rockefeller Plaza, New York, New York
10019, Attention: General Counsel.
8.3 Any shares of this Series which have
been converted, redeemed, exchanged or otherwise acquired by the
Corporation shall, after such conversion, redemption, exchange or
acquisition, as the case may be, be retired and promptly cancelled and
the Corporation shall take all appro priate action to cause such
shares to obtain the status of
33
authorized but unissued shares of Preferred Stock, without designation
as to series, until such shares are once more designated as part of a
particular series by the Board of Directors. The Corporation may cause
a certificate setting forth a resolution adopted by the Board of
Directors that none of the authorized shares of this Series are
outstanding to be filed with the Secretary of State of the State of
Delaware. When such certificate becomes effective, all references to
Series I Stock shall be eliminated from the Certificate of
Incorporation and the shares of Preferred Stock designated hereby as
Series I Stock shall have the status of authorized and unissued shares
of Preferred Stock and may be reissued as part of any new series of
Preferred Stock to be created by resolution or resolutions of the
Board of Directors.
8.4 The shares of this Series shall be issu-
able in whole shares or, if authorized by the Board of Directors (or
any authorized committee thereof), in any fraction of a whole share so
authorized or any integral multiple of such fraction.
8.5 The Corporation shall be entitled to
recognize the exclusive right of a Person registered on its records as
the holder of shares of this Series, and such record holder shall be
deemed the holder of such shares for all purposes.
8.6 All notice periods referred to in the
Certificate shall commence on the date of the mailing of the
applicable notice.
34
8.7 Certificates for shares of this Series
shall bear such legends as the Corporation shall from time to time
deem appropriate.
IN WITNESS WHEREOF, Time Warner Inc. has caused this
certificate to be signed and attested this ____ day of October, 1995.
TIME WARNER INC.
By:__________________________________
Name:
Title:
Attest:
- ------------------------
Name:
Title: